World Economy

Commerzbank to Cut 9,600 Jobs

Commerzbank to Cut 9,600 JobsCommerzbank to Cut 9,600 Jobs

Germany’s second largest lender Commerzbank said it plans to cut 9,600 jobs, nearly a fifth of its current level of 51,300, by 2020 and withhold dividends to pay for a €1.1 billion restructuring.

The Frankfurt-based firm added that the $1.23-billion ($1.12 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, AFP reported.

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 in 2015, and paid its first dividend since the 2008 financial crisis at 20 cents per share.

Shares in the bank lost 1.6% to trade at €5.90 in afternoon trading in Frankfurt, while the DAX 30 index of leading firms was up by 0.5%.

“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.