Commerzbank to cut one in three jobs in Germany

 Commerzbank to cut one in three jobs in Germany

Manfred Knof, Commerzbank’s new chief executive, will axe one in three jobs in Germany in a last-ditch attempt to turn round the fortunes of the ailing lender whose shares have dropped by 90 per cent over the past decade.

The German bank announced on Thursday it has earmarked 10,000 jobs to be cut in the next three years, part of plans to close almost one in two branches in its home market. The number of branches will be slashed from 790 to just 450.

Last month, Commerzbank said it will book a €610m charge for restructuring costs in 2020 after reaching a deal with unions over 2,900 job cuts. On Thursday, it declined to comment if those jobs were included in the new target or will be additional.

The Frankfurt-based lender released the numbers in a regulatory statement after Handelsblatt reported details about the restructuring plan.

“So far, no decisions have been taken on any item of the strategy programme,” said Commerzbank. The management board submitted a draft of its plans to the supervisory board, which will discuss it on February 3. Details will be unveiled at the bank’s annual media conference on February 11.

Mr Knof joined Commerzbank this month from Deutsche Bank after his predecessor, Martin Zielke, and chairman Stefan Schmittmann stepped down last year amid a power struggle with private equity firm Cerberus, one of bank’s biggest shareholders.

Last summer, Cerberus argued that “swift and decisive action now” was required to stop a “downward spiral” caused by bloated costs, low profits and “managerial inaction”. Cerberus criticised the lender for a long history of missing its own “unambitious” strategic targets and said it “has consistently underperformed its peers on practically every metric”.

Mr Knof said in a statement on Thursday: “We want to focus on Commerzbank’s strengths and secure its strong performance for the long term.” This will require it to “thoroughly reduce complexity and cut costs,” he added. The new chief executive acknowledged that the goals were “very ambitious” but stressed that the lender will do “everything necessary to achieve them.”

Commerzbank has been suffering the effects of low interest rates, bloated costs and lacklustre revenue growth for years. In 2019 former chief executive Mr Zielke led merger talks with Deutsche Bank, but its larger domestic rival walked away from the transaction.

Commerzbank said on Thursday it is aiming to lift its return on tangible equity to between 6.5 and 7 per cent by 2024. While it is planning to cut a fifth of its costs, it is hoping that revenues will “remain largely stable”.

The lender said it will finance restructuring costs of €1.8bn “with existing funds” and will fully book them in 2021. It said its common equity tier one ratio — a key measure of balance sheet strength — will remain 200 to 250 basis points above minimum regulatory requirements.

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