Commerzbank to cut 9,600 jobs by 2020

The Commerzbank headquarters in Frankfurt, Germany. (AP)
Updated 30 September 2016
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Commerzbank to cut 9,600 jobs by 2020

BERLIN: Germany’s second largest lender Commerzbank said it plans to cut 9,600 jobs, nearly a fifth of its workforce, by 2020 and withhold dividends to pay for a 1.1-billion-euro restructuring.
The Frankfurt-based firm added that the $1.23-billion plan, still to be agreed at a supervisory board meeting on Friday, would see it report a loss in the third quarter as it writes down the value of goodwill and other intangible assets.
But it forecasts a “slightly positive” bottom line for the whole of 2016.
Like other German banks, Commerzbank is fighting headwinds from low interest rates in the eurozone, tough regulation, intense competition and the arrival of new digital actors on the market.
Board members aim to achieve “sustainable profitability” by focusing on private and business banking customers while shrinking investment banking activities, it said in a statement.
“Profit volatility and risks from regulatory changes will be reduced and capital freed up for the core business” with the retreat from investment banking, it added.
To cover the costs of the restructuring, the bank said it would “cease dividend payments for the time being.”
Commerzbank reported a profit of 1.1 billion euros in 2015, and paid its first dividend since the 2008 financial crisis at 20 cents per share.
Shares in the bank lost 1.6 percent to trade at 5.90 euros in afternoon trading in Frankfurt, while the DAX 30 index of leading firms was up by 0.5 percent.
Commerzbank’s employee roster would shrink by roughly 9,600 — around a fifth of its current level of 51,300 — if the plan is put into action.
The size of the restructuring shows “how difficult the environment is for banks at the moment,” analyst Michael Seufert at Nord/LB bank said, pointing to Commerzbank’s restrained target of 6 percent return on capital after the changes.
“All banks are affected by the low interest rate environment” introduced by the European Central Bank in a bid to drive up inflation, he said, noting that European heavyweights Santander and ING are expected to present new strategies of their own in the coming days.
The ECB has set interest rates at historic lows, offered cheap loans to banks and spent hundreds of billions of euros on government and corporate bonds as it hunts for ways to push up growth and inflation in the 19-nation currency bloc.
German banks have complained loudly about the impact of the low interest rates on their profit margins.
Commerzbank managers predict that the restructuring will create savings of 6.5 billion euros per year and allow them to create 2,300 new jobs in “growth areas” at the bank.
The German state remains a shareholder in Commerzbank to the tune of 15 percent after coming to the lender’s rescue in 2008.
Chief executive Martin Zielke in August batted away rumors that he was considering a tie-up with Deutsche Bank, Germany’s biggest lender and a historic Frankfurt rival.
Deutsche is itself going through a painful restructuring that will see it slash almost 9,000 jobs worldwide and 200 branches in home market Germany.
The once-proud institution is laboring under a burden of around 8,000 legal cases worldwide, including a $14-billion demand from the US Department of Justice over its role in the subprime mortgage crisis.
On Wednesday, the German government strongly denied speculation that it was preparing a rescue plan for Deutsche in the event it faces a US fine that its legal provisions of $5.5 billion are too small to cover.


Norway oil firms lower 2019 investment forecast

Updated 21 February 2019
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Norway oil firms lower 2019 investment forecast

  • Investment forecasts for 2019 lowered to $20.06 billion
  • Several plans for development and operation (PDOs) expected to be submitted

OSLO: Oil and gas companies operating in Norway have lowered their investment forecasts for 2019 to 172.7 billion crowns ($20.06 billion) from 175.3 billion crowns seen in November, a survey by the country’s statistics agency (SSB) showed on Thursday.
In 2020, investments are expected to fall to 158.5 billion crowns according to initial forecasts, but the forecasts could be revised upwards in the months to come, it added.
“Several plans for development and operation (PDOs) are expected to be submitted to the government in both 2019 and 2020,” the agency said in a statement.
“If the schedules for these plans are realized, the accumulated investment costs in 2020 from these projects will increase the investment in field development compared to the present estimate.”
Norway’s oil and gas investments have rebounded from a sharp fall as rising crude prices and cost cuts lift industry activity. It was SSB’s fourth release of companies’ forecasts for 2019 and the first for 2020.
Equinor is Norway’s largest oil firm.