Commerzbank to cut jobs, revamp retail business-sources

  • Rate this Story
  • 0
  • 0

By Alexander Hübner and Arno Schuetze | November 8, 2012 5:28 AM EST

Commerzbank AG , is planning to cut jobs while investing 1 billion euros (813.3 million pounds) in an overhaul of its retail business, two people close to the bank said on Wednesday.

Germany's second biggest bank has not yet decided how many jobs will go, the sources said, after German newspaper Die Zeit reported the group would cut up to 6,000 staff.

Commerzbank will join other big banks and companies across Europe in cutting jobs and costs because of the weak economy. Some of these include telecoms equipment group Ericsson , Dutch bank ING, wind turbine maker Vestas and steel group Kloeckner & Co .

The bank, which received an 18 billion euro bailout after the financial crisis, has since had to cope with Greek debt writedowns, the slowing euro zone economy and demands from regulators to increase capital reserves.

The Frankfurt-based group is set to announce details of its latest strategy revamp at an investor event on Thursday.

Commerzbank, 25 percent state-owned, declined to comment.

Labour representatives expressed concern over the bank's reported job-cutting plans.

"We expect the employer to disclose any such plans and to create transparency, as this speculation causes considerable insecurity among our employees," Beate Mensch, a union official from the Ver.di trade union said in a statement on Wednesday.

Sources close to the bank said it aims to lower costs over the next four years to help reduce its cost-income-ratio to about 70 percent by 2016. This is still high compared with European peers. In 2011, Commerzbank posted a cost-income ratio of 80.8 percent on group level.

But a priority is to bolster the bank's capital position to meet new rules that require thicker cushions to absorb possible losses, the sources said.

Before working on other goals, the bank wants to ensure it achieves a core Tier 1 capital ratio of more than 9 percent under the new rules, known as Basel III, the sources said.

In August, the bank had said it expected to have a core Tier 1 ratio of 7.7 percent by January 2013. This ratio is used to measure a bank's financial strength.

The sources also said that a dividend payment was unlikely before the end of the four-year revamp period in 2016.

In August, Commerzbank had warned of a worsening euro zone crisis and gave a grim profit outlook, saying it might not pay a dividend in 2013.

It had already been forced to drop its 2012 profit targets and limit new business to clients in Germany and Poland to meet new capital requirements.

After pulling back from shipping finance, commercial real estate and public sector lending, Commerzbank is to focus instead on an overhaul of its retail branch network.

(Editing by Jane Merriman)

  • Rate this Story
  • 0
  • 0
Copyright 2012 Thomson Reuters UK. All rights reserved.

Join the Conversation

IBTimes TV
E-Newsletters

We value your privacy. Your email address will not be shared.