Is another German bank in trouble? Commerzbank to cut 9,600 jobs and suspend dividend

By Marion Dakers

Commerzbank said the restructuring will result in a €700 million write-off. Photo / AP
Commerzbank said the restructuring will result in a €700 million write-off. Photo / AP

Commerzbank, the second-biggest bank in Germany, has suspended its dividend and revealed more than 9,000 job losses as it tries to shore up its business in the face of ultra-low interest rates and sagging client activity.

The bank said its decision to cut almost one in five of its employees worldwide and merge two of its largest businesses will result in a €700 million ($1.08 billion) write-off and a loss for this quarter.

The bank's Mittelstand division, seen as the engine room of Germany's mid-sized corporate economy, will be combined with its corporate branch, while investment activity will be scaled back.

Commerzbank also warned that "ongoing weakness in the shipping markets" would push up its loan loss provisions in the coming months.

In total, 9,600 jobs are set to be cut while the bank hopes to hire 2,300 people in new areas to make its business more digital.

Despite its difficulties, Commerzbank reassured investors that its capital ratio was on course to remain at around 12 per cent by the end of the year, up from 11.5 per cent at the end of June.

Commerzbank's new chief executive Martin Zielke joined in May after his predecessor Martin Blessing left the bank, proclaiming the organisation had "overcome the major challenges of the financial crisis or will do so in the coming months".

This latest round of job cuts comes on top of extensive restructuring in the wake of the financial crisis. The bank resumed dividend payments last year for the first time since 2007, and remains partly-owned by the German government.

This latest overhaul comes at a sensitive time for the German banking industry, with larger rival Deutsche Bank battling rumours that the government is readying a rescue plan in case it cannot afford a US$14 billion fine from the US regulators over mortgage mis-selling.

- Daily Telegraph UK

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