- Title: Commerzbank says to cut nearly 10,000 jobs, halt dividend
- Date: 29th September 2016
- Summary: FRANKFURT, GERMANY (FILE) (REUTERS) TILT TO BUILDING LOGO OFFICE EXTERIOR PEOPLE WALKING THROUGH REVOLVING DOOR OFFICE EXTERIOR LOGO NAME AND LOGO ABOVE ENTRANCE LOGO PEOPLE WALKING INTO BUILDING WOMAN AT CASH POINT SEEN THROUGH GLASS DOOR
- Embargoed: 14th October 2016 11:55
- Keywords: Commerzbank cut nearly 10 000 jobs halt dividend Germany bank
- Location: FRANKFURT, GERMANY / LONDON, ENGLAND, UK
- City: FRANKFURT, GERMANY / LONDON, ENGLAND, UK
- Country: Germany
- Topics: Company News Markets,Economic Events
- Reuters ID: LVA00351MD5SD
- Aspect Ratio: 16:9
- Story Text: Commerzbank on Thursday (September 29) said it would cut nearly 10,000 jobs or more than a fifth of its workforce and stop paying dividends for the time being as it restructures to become profitable on a more sustainable basis by 2020.
Germany's second biggest lender said in a statement it expected restructuring costs of 1.1 billion euros ($1.2 billion) as it combines business segments and cuts costs to offset the drag from low loan demand and negative European Central Bank interest rates and as it shifts to digital banking.
The revamp will come at a heavy cost for employees as Commerzbank slashes 9,600 of its 45,000 full-time positions, a more drastic reduction than at peer Deutsche Bank, which is cutting about 10 percent of staff but has suggested deeper cost cutting may be needed.
"It sounds like it could be a sign of the times. German banks as with most European banks under pressure at the moment, low interest rates, difficult trading environment. As a measure of prudence they've decided to chop those 10,000 jobs. They've also suspended the dividend and despite that news the markets initial reaction was that the shares ticked up slightly. Obviously, the market realises that's quite a prudent move. But it is yet another illustration of just how difficult the banking environment is at the moment," said Richard Hunter, Head of Research, Wilson King Investment Management.
Commerzbank plans to merge its business with medium-sized German companies with its corporate and markets segment, while also cutting back trading activities in investment banking to help reduce earnings volatility and free up capital for investment.
That move is also expected to prompt a writedown of around 700 million euros in the third quarter, leading to a quarterly net loss, Commerzbank said. It expects to turn a small net profit in full-year 2016, down from 1.1 billion euros last year, it said.
The bank will concentrate on two customer segments in future: Private and Small Business Customers and Corporate Clients, with the restructuring expected to lift net return on tangible equity to at least 6 percent by the end of 2020 from 4.2 percent last year.
On jobs, Commerzbank said it would also aim to add 2,300 positions in areas where business was growing, which would ease the net reduction to 7,300.
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