Commerzbank Sees $3.5 Billion 2020 Loss Amid Strategy Revamp

(Bloomberg) -- Commerzbank AG expects to post a loss of about 2.9 billion euros ($3.5 billion) for 2020, to cover the rising cost of the health crisis and a restructuring program aimed at forging a return to profitability.

The loss includes a charge of about 1.5 billion euros reflecting lower asset values and 800 million euros of previously announced cost cuts, according to a statement from the Frankfurt-based bank late Wednesday. An expected operating loss for last year “clearly reflects the burdens of the coronavirus pandemic,” it said. The bank is also cutting 10,000 jobs.

The annual loss exceeds the 2.7 billion euros that analysts had estimated, and is in stark contrast to results at German rival Deutsche Bank AG, which posted its first annual net profit since 2014 on Thursday. The 2020 loss almost completely wipes out the bank’s profit over the five previous years as the beleaguered German lender embarks on another restructuring under new Chief Executive Officer Manfred Knof.

Commerzbank detailed some of its new strategy last week after a Bloomberg report about the plan. Developed by Knof and supervisory board Chairman Hans-Joerg Vetter, the program is designed to shed about a quarter of the workforce to boost return on tangible equity to about 7% by 2024. It’s a stark turnaround from the growth targets pursued by their predecessors.

Commerzbank fell as much as 1.7% in Frankfurt trading and was down 1.4% as of 9:18 a.m. The firm’s shares are down 84% over the past decade, the third-worst performance in the 33-company Bloomberg Europe 500 Banks and Financial Services index.

Foreign Outposts

Commerzbank’s supervisory board said it backed the turnaround plan, and provided more details on Wednesday. It said the program will include cutting its foreign presence to fewer than 40 countries from about 50.

“Our new strategy creates a strong foundation for a sustainably profitable and highly efficient Commerzbank,” Knof said in the statement. “The planned reductions are certainly very painful. We will implement this program rigorously and consistently but also in a fair manner and with mutual respect.”

The bank had been working on a new strategy for more than a year, but a plan to present it in August fell apart when former CEO Martin Zielke and then-Chairman Stefan Schmittmann stepped down amid heavy criticism from investors. The supervisory board subsequently appointed Vetter as the new chairman, who in turn hired Knof to lead the next turnaround effort. Knof joined in January.

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