9 600 jobs on line at German lender
Commerzbank plans overhaul
COMMERZBANK plans to reduce 9 600 jobs, or about a fifth of the workforce, and suspend dividends as its chief executive, Martin Zielke, seeks to shore up profitability at the German lender.
Under the draft plan, which was presented to the supervisory board, Commerzbank would merge its Mittelstands-bank with the corporates and markets unit and scale back securities trading operations, the bank said yesterday. The management board will decide today on the restructuring plan, which will cost about €1.1 billion (R16.7bn).
Zielke has been under pressure to counter a slump in earnings that forced him to scale back full-year profit targets just months after taking the helm.
Under his predecessor Martin Blessing, the bank eliminated 5 200 jobs to counter volatile markets and record-low interest rates as regulators demanded lenders hold higher capital buffers against risky activities.
“This looks like it could be the long-awaited broad overhaul and the targets that Zielke is setting even look realistic,” said Daniel Regli, an analyst at MainFirst.
The shares fell 0.5 percent to €5.97 at 11.27am in Frankfurt, paring earlier gains. The bank has lost about 38 percent of its market value this year.
As part of the planned overhaul, Commerzbank said it would focus on private and small businesses, as well as corporate clients. While about 2 300 jobs would be created, the restructuring plan would result in the net loss of 7 300 full-time positions.
Goodwill and intangible assets of the two merged units will cause a write-down of about €700 million in the third quarter, in a move that is seen sparking a loss in that period. In the full year, the lender expects a “small net profit”, when targeting revenue of between €9.8bn and €10.3bn by 2020 as part of Zielke’s plan.
The lender earlier this year paid a dividend of 20c per share for last year, its first payout since 2007.
It was expected to pay a dividend of 30c per share for this year, according to the Bloomberg Dividend Forecast.
Under Zielke’s plan, costs would be reduced to €6.5bn, taking the cost-to-income ratio below 66 percent, Commerzbank said. The bank targets a return on tangible equity of at least 6 percent by 2020. “In a normalised interest rate environment, revenues could rise to over €11bn and the cost-income ratio could fall to about 60 percent,” the bank said.
Commerzbank, which is still partly owned by the German government, plans to inform investors in detail about Zielke’s strategy at an investors day in London on October 4.