Banks facing huge challenges, says Commerzbank boss

Frankfurt is home to some of Europe’s biggest banks, many of which are facing tough choices amid an economic slowdown. (AP)
Updated 28 September 2019

Banks facing huge challenges, says Commerzbank boss

  • German lender to cut thousands of staff and close a fifth of branches

FRANKFURT: The challenges facing banks are “enormous,” Commerzbank Chief Executive Martin Zielke said on Friday, after the German lender said that it no longer expected a rise in underlying revenues this year.

The warning, announced late on Thursday, came as the bank’s supervisory board approved plans announced last week to cut thousands of staff and close a fifth of branches following a failed merger with bigger rival Deutsche Bank.

Commerzbank, part owned by the German government after a bailout, has been struggling for years with a legacy of bad debts, high costs and fines, and tough trading conditions have hampered its recovery efforts.

“Negative interest rates, increasing regulation, a weaker economy and tough competition ... The challenges facing banks are enormous,” Zielke said.

Outgoing finance chief Stephan Engels added the latest loosening of policy by the European Central Bank “will not make our lives easier,” and that a program designed to cushion the blow for banks would not fully compensate.

The bank said on Thursday that board member Bettina Orlopp would succeed Engels as chief financial officer, while Sabine Schmittroth would become board member for human resources.

“Over the course of 2019, the market environment has continued to deteriorate further. This has been particularly evident in the corporate clients business,” it said, explaining the downgrade in its revenue expectations.

The supervisory board also approved plans to sell a stake in the bank’s Polish subsidiary mBank and absorb its Comdirect online brokerage unit.

HIGHLIGHTS

● No longer expects revenue rise.

● Legacy of bad debts.

● Bank announces new CFO.

The lender flagged the strategic overhaul last week.

The measures were approved by the board during a two-day meeting. Among the plans, the bank will cut 4,300 jobs in some places but add 2,000 jobs in “strategic areas,” so the group headcount will fall in total by about 2,300 full-time positions, equivalent to about 5.7 percent of its workforce.

The mBank sale will further reduce staff levels. Headcount will fall to 29,300, a spokesman said. The company now employs about 40,700 people.

Commerzbank said the strategy would involve investment of (€1.6 billion) $1.8 billion, with €750 million going into new technology and the rest earmarked for restructuring.

The restructuring plan is negative for the German lender’s credit rating, ratings agency Moody’s has said.


Egypt and Cyprus to boost Eastern Med gas ties

Updated 19 min 14 sec ago

Egypt and Cyprus to boost Eastern Med gas ties

  • The two countries also progressed talks to build a marine pipeline
  • The pair agreed to hold a further meeting within the next two weeks

CAIRO: Egypt and Cyprus plan to boost cooperation in developing gas infrastructure in the Easter Mediterranean.
Egypt’s petroleum and mineral resources minister Tariq Al-Mulla on Wednesday discussed plans to convert the East Mediterranean Gas Forum to an intergovernmental organization with Cyprus’s Minister of Energy Natasa Pilides.
The pair agreed to hold a further meeting within the next two weeks to complete the procedures for the forum.
The two countries also progressed talks to build a marine pipeline between the two countries to transfer natural gas from the Aphrodite gas field of Cyprus and re-export it through Egypt.
A 2010 study by the United States Geological Survey estimated the volume of gas reserves in the eastern Mediterranean basin to be about 345 trillion cubic feet of gas. This basin also contains some 3.4 billion barrels of oil, along with large quantities of gas liquids.