Commerzbank to Post $3.5 Billion 2020 Loss on Restructuring

(Bloomberg) -- Commerzbank AG will post a preliminary loss of almost 2.9 billion euros ($3.5 billion) for 2020 after taking big writedowns tied to the pandemic and booking restructuring charges for a massive cost-cutting program.

The lender will also report an operating loss of 233 million euros for last year, which “clearly reflects the burdens of the coronavirus pandemic,” the Frankfurt-based company said in a preliminary earnings statement Wednesday. The loss includes previously announced expenses of more than 800 million euros for cost cuts and a goodwill impairment of roughly 1.5 billion euros.

While Commerzbank had warned investors of billions in charges last month, the annual loss exceeded the 2.7 billion euros that analysts had estimated. And 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.

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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