Germany's Commerzbank to Cut Bonuses After Slipping to Loss in Fourth Quarter
By Jerin Mathew | February 15, 2013 9:38 PM EST
The second -biggest bank in Germany reported a loss of €716m ($957m, £616m) for the fourth quarter of 2012, compared to a profit of €316m in the prior-year quarter.
The quarterly loss was primarily due to one-time losses of €185m from sale of Bank Forum in Ukraine and €560m in tax accounting charges. In addition, the bank set aside €614m in the quarter for bad loans, compared to €381m last year.
Net interest income for the quarter fell to €1.38bn from €1.62bn a year ago, as the bank's gains were hurt by lower interest rates in the country.
For full-year 2012, net profit declined to a meager €6m from the prior year's €638m as loan losses increased and interest earnings shrank.
Due to the "unsatisfactory net profit" for 2012, the bank has cut the variable remuneration for the year by 17.2 percent. This follows a 12.1 percent cut in employee bonuses in 2011.
In 2012, variable remuneration amounted for about 8 percent of total personnel expenses.
The bank noted that it expects about €500m expenses in the first six months of 2013 in connection with its planned job cuts. In January, Commerzbank said that it intends to cut about 6,000 jobs, representing 10 percent of its total workforce.
Commerzbank, which received an €18bn bailout during the financial crisis, has been restructuring its business by dropping riskier activities amid a tougher business environment.
"In 2012 we fulfilled the prerequisites for the realignment of the bank. Initial measures are taking effect, but one thing is clear: there is a long way to go," CEO Martin Blessing said in a statement.
The bank is disposing its non-core businesses in commercial real estate and government finance in order to pay back the government's rescue amount. The government still owns about 25 percent of the bank.
Since its rescue, the bank has been decreasing risky loans and investments as required by EU authorities that have set tougher rules for big banks in the region.
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