Shares in this article
indices in this article
In addition, around 400 branches are to be closed, the Bloomberg news agency reported on Saturday, citing persons familiar with the matter. This would mean that job and branch reductions would be significantly higher than announced in September 2019. Commerzbank CEO Martin Zielke had already announced in February that the austerity measures should be pushed again.
Zielke is under pressure because many investors and especially the Cerberus group are not satisfied with the development and goals of the savings program. Zielke had announced the reduction of another 2,300 or around six percent of full-time positions and the closing of every fifth of around 1,000 branches. However, he also softened the targets for the expense ratio and return on equity. The state, which is the largest shareholder of the bank listed in the MDax with just over 15 percent, then commissioned an expert opinion from the Boston Consulting Group (BCG).
According to a previous Bloomberg report, the consultants recommended even more drastic savings measures, including an even clearer downsizing of the branch network. The planned reduction in costs by around 600 million euros by 2023 should therefore be twice or three times as high as the management’s plan. Zielke then announced in February that it would revisit its own strategy. At the May general meeting, he said the bank would “step up its cost management again this year.” On August 5, the bank wants to present the details of the planned further savings measures when the figures for the first six months are announced.
A spokeswoman confirmed this plan, according to the Bloomberg report on Saturday. In addition, she did not want to comment on information. Many scenarios are currently being discussed. But no decisions have yet been made. The report said that Zielke and CFO Bettina Orlopp will present the new goals at a board meeting this Wednesday. However, it has not yet been decided which savings goals should be presented to the supervisory body. Many managers would have doubts whether these massive cuts are feasible. Therefore, it is also possible that the planned job cuts or branch closings could not be so extreme.
According to Bloomberg information, the savings target could be doubled within the new plans. In September Zielke announced that it wanted to cut costs by around 600 million euros to less than 6.3 billion euros by 2023. This sum includes the expenses of the Polish subsidiary mBank. Commerzbank had to cancel its planned sale in May due to insufficient interest from potential buyers. By cutting back on jobs and branches, the bank could increase the savings target to well over a billion euros.
Zielke should now also be significantly more ambitious than recently when it comes to return on equity, according to the Bloomberg report. A lot more is expected from Zielke here – after all, the goal of a return of more than four percent or more than five percent, if the general conditions are good, was classified by 2023 as not very ambitious and disappointing by most experts and investors. The US financial investor Cerberus, which holds a little more than five percent of Commerzbank, should however also be dissatisfied with the new goals and continue to push for a change at the top of the bank, Bloomberg wrote on Saturday.
In mid-June, Cerberus wrote to the supervisory board, which is available to the German press agency, calling for sustainable changes in management and in terms of operational and strategic orientation. “In the future, we will use our means to find alternative ways to bring about the changes necessary to overcome Commerzbank’s continued lack of success in addressing the problems expressed by the weak development in almost all of its key business figures,” the two-sided report said Letter from Cerberus Capital Management.
Cerberus does not trust Zielke to implement the tough restructuring course. In September 2016, he announced that he would reduce the number of full-time positions by 7,300 to around 36,000, and then had to row back over the years. In the end, the number of full-time positions in the strategy program announced in 2016 should drop to just over 38,200. Based on this, the number of digits is expected to decrease the previous plans by another 2,300 to 35,900. Commerzbank has been struggling for a number of years with a number of home-made problems and the difficult industry environment, such as the persistent low interest rates, which is depressing earnings.
The beginning of the homemade problems began in 2005 with the takeover of Eurohypo, initiated by the then CEO, Klaus-Peter Mller, who, after his time as Group CEO, headed the Supervisory Board for ten years until May 2018. This was followed by the purchase of Dresdner Bank at the end of August 2008 – shortly before the collapse of the US investment bank Lehman Brothers and the subsequent financial and economic crisis. Because of large gaps in the balance sheet, Commerzbank had to be saved by the state.
The state has since returned the silent deposits in the billions of euros – it is still sitting on part of the shares. An exit without losses is not in sight. Adjusted for many capital increases, the share price fell from almost 230 euros in the summer of 2007 to less than four euros recently – long-term committed investors have therefore lost almost everything, and it doesn’t look good in the short term either. Cerberus, for example, is currently sitting on a book loss in the hundreds of millions – since it started in summer 2017, it has fallen by more than 60 percent. The US investor’s five percent package is currently worth less than EUR 250 million.
/ zb / jha /
More Commerzbank news
Image sources: Commerzbank AG