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Bloomberg
Commerzbank AG expects to post a loss this year as new Chief Executive Officer Manfred Knof ditches a failed growth strategy in favour of deep cost cuts.
While the German lender seeks to achieve an operating profit, 900 million euros ($1.1 billion) in costs for its turnaround plan and loan loss provisions between 800 million euros and 1.2 billion euros will likely push the bank into the red, it said in its annual report.
Knof, who took over in January, has embarked on a series of cost cuts after two efforts by his predecessor Martin Zielke to grow his way to profitability through client acquisitions failed. The new CEO is shedding about a third of the German workforce, closing almost half the retail branches and shuttering roughly 30% of the bank’s foreign offices, in an effort to save 1.4 billion euros a year.
“The 2021 financial year is an important first step†for the new strategy, Knof said in the report. “Commerzbank expects income to fall slightly in 2021 as a result of the restructuring and a stronger focus on making more efficient use of equity capital,†he said.
The plan suffered a setback earlier this month when Supervisory Board Chairman Hans-Joerg Vetter, who had been an architect of the new strategy, resigned for health reasons. The lender is currently looking for a permanent successor.
Chief Financial Officer Bettina Orlopp said last month that it would be “a challenge†to post a profit after taxes this year. The bank posted a net loss of 2.87 billion euros for last year, after writing down assets hit by the pandemic and booking some costs for future job cuts.