Commerzbank, Germany’s second-largest lender, has reported a net loss of almost €2.9 bn, its first since the Great financial Crisis, citing Covid-19 drag and restructuring woes.
According to the preliminary results, the Frankfurt-based bank booked an operating loss of €233m in 2020, compared with pre-tax profits of €1.2bn a year earlier.
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The €2.9bn-net loss compared with a €585m-net gain in 2019.
The German lender is going through an overhaul centred around job cuts and branch closures to improve its profitability.
The bank says its ambitious restructuring strategy will lower costs by €1.4bn, or around 20%, by 2024 compared with 2020.
The plan includes shutting 340 of its 790 branches in Germany.
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By GlobalDataThe lender, struggling with stiff competition in its crowded home market, aims to move towards online banking and cashless payment options.
Commerzbank say it has reached an agreement with labour representatives on plans to slash 10,000 jobs by 2024. The cuts are expected to affect one in three jobs in Germany.
Shares are sliding, investors are worried
Big shareholders are calling for drastic measures, which are also supported by regulators.
The German government still holds a nearly 16% stake in the bank which it bailed out during the 2008-2009 financial crisis.
US private-equity firm Cerberus, which holds more than 5% of Commerzbank, has called for even deeper cuts.
Cerberus has also asked for two board seats, a request that Commerzbank has shunned.
Investor anxiety stems from a dismal performance by the bank’s stock, which was trading above €10 when Cerberus disclosed its stake in mid-2017 and is now at €5.68.
Due to deteriorating market parameters, among others the interest rate levels in the euro area and in Poland, the Bank expects the existing goodwill of around €1.5bn to be fully written off.
Digitisation as the way forward
Last September, the German lender hired on Manfred Knof, head of rival Deutsche Bank’s private bank in Germany, as chief executive. The industry veteran, brought in to succeed Martin Zielke, was to drive the company’s turnaround.
Former CEO Martin Zielke had resigned along with Commerzbank’s chairman in July after acknowledging he had failed to sufficiently turn around the bank.
Knof took over in January.
His appointment comes in a year that has included leadership changes at several large European banks, including Credit Suisse, UBS, and ING, as earlier restructurings of the lenders were wrapped up and the sector prepares for an expected phase of consolidation.
Commerzbank has signalled that the new CEO will help it to digitise its operations further, another industrywide move that is costing banks billions of euros to bring more banking online and to automate processes.
The need to join forces on the massive spending is one more driver for bank mergers, analysts say.
