Commerzbank to cut 9,600 jobs by 2020

The Commerzbank headquarters in Frankfurt, Germany. (AP)
Updated 30 September 2016

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.

US-Saudi business council reports $13bn in contracts

Updated 24 May 2019

US-Saudi business council reports $13bn in contracts

  • Improved oil prices, combined with a government focus on spending, contributed to the rise, the council said

LONDON: The value of joint Saudi-US contracts rose to $13 billion in the first quarter of 2019, according to a business council report.

That marked the highest value of awarded contracts since the first quarter of 2015, the US-Saudi Arabian Business Council said.

The value of contracts awarded during the first quarter amounted to about half of the total value in all of last year, it added.

The contracts “included many vital projects, notably in the oil, gas, water and transport sectors,” Abdallah Jum’ah, the co-chair of the council, was reported as saying by Asharq Al-Awsat.

Energy was the top sector, with $3.1 billion of the value of contracts awarded, with many struck by Saudi Aramco. 

Improved oil prices, combined with a government focus on spending, contributed to the rise, the council said.

The construction sector also looks set for a recovery after many projects were put on hold due to the oil-price crash.

“If the pace of awarding construction contracts witnessed during the first quarter of 2019 continues for the rest of the year, the index of awarding construction contracts may return to the range we witnessed before the canceling and postponing of mega projects due to lower oil revenue,” the council said.