Commerzbank plans to reduce 9,600 jobs, or about a fifth of the workforce, and suspend dividends as 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 will merge its Mittelstandsbank, catering to small and medium-sized companies, with the corporates and markets unit and scale back securities trading operations, the Frankfurt-based bank said in astatement on Thursday.
The management board on Friday will decide on the restructuring plan, which will cost about €1.1 billion. Mr Zielke (53) 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 of Germany’s second-largest lender.
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.
Shares
The shares fell 0.5 per cent to €5.97 in Frankfurt after the news was announced, paring earlier gains. The bank has lost about 38 per cent of its market value this year.
As part of the planned overhaul, Commerzbank will focus on private and small businesses as well as corporate clients. While some 2,300 jobs will be created, the restructuring plan will result in the net loss of 7,300 full-time positions, according to the statement.
Goodwill and intangible assets of the two merged units will cause a writedown of about €700 million in the third quarter, in a move that’s seen sparking a loss in that period.
In the full year, the lender expects a “small net profit,” when targeting revenue of between €9.8 billion and €10.3 billion by 2020 as part of Mr Zielke’s plan.
The lender earlier this year paid a dividend of 20 cents per share for 2015, its first payout since 2007. It was expected to pay a dividend of 30 cents per share for this year, according to Bloomberg forecasts.
Under Mr Zielke’s plan, costs will be reduced to €6.5 billion, taking the cost to income ratio below 66 per cent, Commerzbank said.
The bank targets a return on tangible equity of at lest 6 per cent by the end of 2020.
“In a normalised interest rate environment, revenues could rise to over €11 billion and the cost-income ratio could fall to around 60 per cent,” the bank said.
Commerzbank, which is still partly owned by the German government, plans to inform investors in detail about Mr Zielke’s strategy at an investors day in London on October 4th.
