Is another German bank in trouble? Commerzbank to cut 9,600 jobs and suspend dividend

By Marion Dakers, financial services editor 

29 SEPTEMBER 2016 • 1:37PM

Commerzbank, the second-biggest bank in Germany, has suspended its dividend and revealed more than 9,000 job losses as it tries to shore up its business in the face of ultra-low interest rates and sagging client activity.  

The bank said its decision to cut almost one in five of its employees worldwide and merge two of its largest businesses will result in a €700m write-off and a loss for this quarter.

The bank’s Mittelstand division, seen as the engine room of Germany’s mid-sized corporate economy, will be combined with its corporate branch, while investment activity will be scaled back.

Commerzbank also warned that “ongoing weakness in the shipping markets” would push up its loan loss provisions in the coming months. The bank decided four years ago to exit the ship financing business but still has about €8bn on its books.

In total, 9,600 jobs are set to be cut while the bank hopes to hire 2,300 people in new areas to make its business more digital over the next four years. The wide-ranging restructuring will cost €1.1bn, the bank said, and will cut its cost base from €7.2bn a year to €6.5bn by 2020.

"We simply don't earn enough money to lead the bank sustainably and successfully into the future. And this situation will get worse if we don't do something about it," chief executive Martin Zielke said in a draft note to employees, according to Reuters.

The bank will cease dividend payments "for the time being", prompting analysts at RBC Capital Markets to scrap their forecasts for payments until at least 2018.

Despite its difficulties, Commerzbank reassured investors that its capital ratio was on course to remain at around 12pc by the end of the year, up from 11.5pc at the end of June.

Commerzbank’s new boss Mr Zielke joined in May after his predecessor Martin Blessing left the bank, proclaiming the organisation had “overcome the major challenges of the financial crisis or will do so in the coming months”.

Mr Zielke was expected to make major changes to the bank after it posted an 18pc fall in quarterly operating profits in August and scaled back its targets for the year. His plans will be presented to the board for approval on Friday.

This latest round of job cuts comes on top of extensive restructuring in the wake of the financial crisis. The bank resumed dividend payments last year for the first time since 2007, and remains partly-owned by the German government after a bailout in 2009.

The overhaul comes at a sensitive time for the German banking industry, with larger rival Deutsche Bank battling rumours that the government is readying a rescue plan in case it cannot afford a $14bn fine from the US regulators over mortgage mis-selling.

Shares in Commerzbank have lost more than 40pc of their value since the start of the year, and fell a further 2.5pc after it announced the restructuring.

http://www.telegraph.co.uk/business/2016/09/29/now-another-german-bank-is-in-trouble-commerzbank-to-cut-9600-jo/

ΣΧΕΤΙΚΑ: Πάει για χρεοκοπία η Commerzbank;