The momentum of the beginning of the year at Commerzbank is gone. The expensive corporate restructuring and a large project that has failed are a burden. But the day-to-day business was also not so profitable recently.
After a loss of half a billion euros in the second quarter, Commerzbank’s black figures for the full year 2021 have moved further into the distance. 394 million euros were lousy in the half-year balance sheet at the end of June, as the Frankfurt-based MDax group announced on Wednesday.
At the beginning of the year, Commerzbank had surprised with its return to profitability. However, high costs for the corporate restructuring and further setbacks in the second quarter pulverized the initial successes. For the three-month period from April to June inclusive, Commerzbank posted a loss of 527 million euros – after a profit of 183 million euros in the same period of the previous year.
The CEO Manfred Knof, who has been in office since January 1st, expressed satisfaction: “We achieved a solid operating result in the first half of the year. The implementation of the strategy is right on track. ” In day-to-day business, the bank earned 570 million euros in the first half of the year, just 32 million euros of which in the second quarter.
Commerzbank is paying dearly for the restructuring of the Group, which has been ongoing since the beginning of the year, including job cuts and branch closings. The institute booked 976 million expenses for this in the first half of the year, of which 511 million euros in the second quarter.
In addition, there were other burdens: the bank wrote off 200 million euros for the canceled outsourcing of securities processing. The major project was initiated in 2017 under the then CEO Martin Zielke, now a possible deal with the major British bank HSBC has been canceled, Zielke’s successor Manfred Knof stopped the major project, which had already been delayed several times, with immediate effect in July. The reason was: The significantly increased trading volume and the technological advancement made it possible for Commerzbank to continue the securities settlement profitably.
In addition, provisions in the amount of 66 million euros for the judgment of the Federal Court of Justice (BGH) on the subject of bank fees at the end of April reduced the quarterly result. The BGH ruled that banks must obtain the consent of their customers for changes to general terms and conditions. Many bank customers can now claim back part of fees that have been paid too much.
After staff squabbles and a loss of billions in 2020, Knof is pushing the pace with the restructuring of the company. An austerity course is intended to bring the institute, of which the German state has been the largest shareholder since the financial crisis in 2008/2009, back on the road to success. By the end of 2024, the Board of Management intends to reduce the number of full-time positions across the group from around 39,500 to 32,000. At the end of June, the institute had a total of 38,671 full-time employees in Germany and abroad.
240 branches in Germany are expected to close this year. After the restructuring of the group has been completed, 450 of the 790 branches are to be left. The aim of the management is to reduce the total costs to 5.3 billion euros by the end of 2024. That would be around 20 percent less than in 2020. For the current year, the board has confirmed the cost target of around 6.5 billion euros.
The Management Board is sticking to the forecast of increasing earnings – i.e. total revenues – in comparison to the previous year for the year as a whole. In the first half of the year, revenues were around EUR 4.4 billion, 5.5 percent higher than in the same period of the previous year. Analysts are forecasting a good 8.3 billion euros in revenues for the full year 2021. In 2020 as a whole, the institute had generated revenues of around 8.2 billion euros; in 2019 it was just over 8.6 billion euros.
The Management Board expects the core capital ratio to be around 13 percent for the year as a whole. At the end of June the rate was 13.4 percent. Core capital is seen as a buffer for crises. “Despite the high one-off effects and the restructuring costs, we kept our core capital ratio stable in the second quarter,” said Bettina Orlopp, CFO. “This proves once again that we have a very strong basis for the transformation.”
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
