Commerzbank profit hit by Greek holdings

Germany's second biggest bank, Commerzbank, warned Wednesday that its prospects this year and next depend on the eurozone debt crisis, which savaged its earnings and has rocked markets.

Commerzbank profit hit by Greek holdings
Photo: DPA

In the second quarter, Commerzbank said its net profit slumped 93 percent to €24 million from €352 million in the year earlier period as it took a €760 million hit on its holdings of Greek government debt.

For the rest of 2011, the bank’s results will depend on “the implementation of the package of measures to tackle the European sovereign debt crisis and the absence of any further escalation of the current situation,” a statement said.

An ambitious 2012 target of an overall operating profit of more than $4 billion has not been abandoned but appears much less likely now.

It is “still conditional upon stable markets, which we are presently only seeing to a restricted extent owing to the sovereign debt crisis,” it said.

“A return to more stable markets is dependent on how the current crisis develops,” it added.

The bank said that on the positive side, its second quarter provisions for risky loans fell to €278 million from €639 million a year earlier.

Its core tier one capital ratio, a measure of its ability to weather exceptional shocks, stood “at a comfortable 9.9 percent” of assets as of June 30, the statement said.

The partly state-owned bank said it expects a 2011 operating profit “well above the figure achieved in 2010” on its core operations — private customer services, lending to small- and medium-sized enterprises, activities in central and eastern Europe, and corporate banking and market operations.

But an internal ‘bad bank’ where Commerzbank has quarantined risky assets, and structured finance operations that transfer risks on such things as the securitisation of mortgage loans, are not taken into account in the forecast.

With core earnings of €2.1 billion for the first half, Commerzbank has already surpassed the 2010 figure of almost €2 billion.

In May, Commerzbank forecasted a 2011 operating profit significantly more than the previous year’s level, which was €1.4 billion, and for the first half it chalked up €1.2 billion.

However, most of that came in the first quarter, with operating profit slumping to just €55 million in the three months leading up to June.

In morning trade on the Frankfurt stock exchange, Commerzbank shares gained 1.12 percent while the DAX index on which they are listed was up 1.30 percent overall.


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Germany’s Commerzbank to cut 10,000 jobs and close 340 branches

Germany's second-largest lender Commerzbank said Thursday it will cut 10,000 jobs and close 340 branches by 2024 as it grapples with a switch to online banking and cashless payment options.

Germany's Commerzbank to cut 10,000 jobs and close 340 branches

The cuts will affect one in three jobs in Germany, the Frankfurt-based lender said in a statement.

“As part of a wide-ranging digitalisation, the bank will substantially reduce its branch network from the current level of 790 to 450,” it said.

“Compared to the figures expected for 2020, costs will be reduced by €1.4 billion or around 20 percent by 2024.”

Like its crosstown rival Deutsche Bank, Commerzbank had already announced thousands of job cuts as it struggles to adapt to a reduced need for bricks-and-mortar branches.

The troubled lender had already announced 2,900 job losses over the course of 2020 and said in December it was booking €610 million in additional provisions to finance the cuts.

It was not clear whether these job cuts were included in Thursday's figure.

The lender posted a €69 million net loss in the third quarter of 2020, during which it closed 200 branches.

READ ALSO: Germany's Commerzbank to slash 4,300 jobs

At the end of September, it had 39,600 employees.

Commerzbank said it would likely end the year with a net loss for the first time since 2009.

The task of getting the bank back on track will fall to its new boss from the start of 2021, Manfred Knof, a defector from Deutsche Bank.

The proposed cuts will be discussed at a supervisory board meeting in February, it said.

Commerzbank “intends to focus and digitalise its business model, considerably reduce costs in all areas, and significantly increase its profitability by 2024,” it said.