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Commerzbank board takes pay cut after €6.6 billion in losses

Germany's second biggest bank, Commerzbank, posted a 2008 net loss of €6.6 billion ($9 billion) on Friday and said its board would take a 65 percent pay cut.

Commerzbank board takes pay cut after €6.6 billion in losses
Photo: DPA

Commerzbank had reported a 2008 net profit of €3 million in February but that figure did not include results from Dresdner Bank, bought from the insurance group Allianz for €4.7 billion.

Commerzbank waited until publishing its annual report to present pro forma results that included Dresdner, which has suffered steep losses owing to the international financial crisis.

“The overriding theme of 2009 will be the integration of Dresdner Bank,” Commerzbank said, without providing a detailed earnings forecast.

Commerzbank shares soared 11.06 percent to €4.52 in midday trades on Friday, the biggest gainer by far, while the DAX index of leading German stocks was 1.27 percent lower overall.

Since Friday, stock in the bank has gained more than 50 percent.

Chairman Martin Blessing had said in February that the bank did not expect to see a profit this year but that it should do so in 2010.

“If the effects of the global interest rate cuts leads to a recovery from 2010 onwards, Germany is expected to grow faster than the rest of the eurozone,” a statement said. “This will benefit the new Commerzbank.”

Investors welcomed the guidance and news the bank had covered much of its 2009 refinancing needs, pushing the shares sharply higher in midday trade on the Frankfurt stock exchange.

Because Commerzbank has received support from the German banking sector stabilisation fund SoFFin, the salaries of senior executives will be capped and the bank will not pay a dividend this year or next, the statement said.

Blessing will be paid €500,000 and the entire board of directors will receive a total of €4.3 million, down 65 percent from the 2007 figure of €12.4 million, a statement said.

The government now owns a stake of 25 percent plus one share in Commerzbank following a second capital injection of €10 billion that brought the total to €18.2 billion.

Commerzbank has also received loan guarantees worth €15 billion.

On Friday, the bank said that “2008 was dominated by the effects of the financial market crisis. Nevertheless, we took important steps to further strengthen Commerzbank’s position.”

The bank forecast higher operating expenses and around €2 billion in restructuring charges this year but added that it also expected to earn higher net interest income.

The statement said Commerzbank had already secured more than half of the year’s total refinancing requirements and expected to raise a total of around €20 billion in the capital markets in 2009.

It forecast growth in the bank’s private and corporate clients segment this year as well.

Even without the state aid and a break in the price it paid for Dresdner, Commerzbank “demonstrates reassuring financial stability, it has no problem with refinancing,” Baader Bank trader Robert Halver told AFP.

The new Commerzbank holds accumulated toxic assets with a market value of more than €55 billion, the annual report said.

But they have been isolated since January in an internal division following a restructuring of the bank, because “they are complex financial products that must be managed separately,” a bank spokesman told AFP.

BANKING

German online bank N26 shutters US service

German online bank N26 said Thursday it was closing its operation in the United States next year, as regulators in Europe place the "fintech" start-up under increased scrutiny.

The N26 logo on a bank card.
The N26 logo on a bank card. Photo: picture alliance/dpa | Christophe Gateau

N26’s 500,000 customers in the US would be able to use their services until January 11th, 2022, the bank said in a statement, after which it would cease to operate in a market it first entered in 2019.

Instead the Berlin-based operation would “sharpen its focus on its European business”, where it already operates in 24 countries and is exploring expansion into more eastern European markets.

N26 said it would also look to launch new “investment products in the coming year” to sit along side its current account service.

Founded in 2013, N26 offers free, online-only banking services to around seven million clients and is one of Germany’s most high-profile financial technology or “fintech” firms.

In October, the bank raised $900 million from private investors, and announced a plan to hire a further 1,000 employees to reinforce its product development, technology and cybersecurity teams.

READ ALSO: German online bank N26 to create 1,000 jobs

At home, N26 has been in the crosshairs of the German banking watchdog BaFin since 2018 after a local news media investigation found that it was possible to open account with forged IDs.

Earlier in the month, the regulator said it was upping its oversight operations at N26, appointing a special representative to monitor the bank’s progress towards solving issues in “risk management with regard to IT and outsourcing” identified by BaFin.

The regulator also limited the number of new customers N26 could take on to 50,000 a month until the shortcomings were addressed.

N26 was already being monitored by BaFin over failures in the start-up’s anti-money laundering system.

BaFin issued N26 with a 4.25-million-euro ($4.8-million) penalty earlier this year in connection with around 50 “suspicious transactions” the bank failed to report promptly enough.

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