Commerzbank, Germany's second-largest bank, may cut as many as 5,000 jobs

[FRANKFURT] Commerzbank AG is preparing to cut as many as 5,000 jobs under a new strategy by Chief Executive Officer Martin Zielke to boost profitability, Boersen-Zeitung reported, without saying where it obtained the information.

Commerzbank, Germany's second-largest bank, may reveal the changes next week when Mr Zielke presents his plan to the supervisory board, according to press reports.

Proposals include merging some corporate businesses with the investment bank and reducing the number of operating units to three from four, Boersen-Zeitung said. A spokeswoman declined to comment on the reports or the CEO's plans.

Mr Zielke is turning his attention to the Mittelstandsbank, which serves about 100,000 small- and medium-sized companies, in his bid to deliver more growth and bolster earnings.

The CEO, who took the job about five months ago, said in August that digitisation will be key to the restructuring. Commerzbank had about 50,000 employees as of June 30.

"The business with national and international corporate clients is the DNA of the bank," Mr Zielke said in an internal interview obtained by Bloomberg on Friday.

"We will take care to ensure that corporate clients and the Mittelstandsbank don't just stay strong but grow and are successful."

Shares Tumble

Commerzbank was down 0.4 per cent at 6.29 euros as of 10:21am in Frankfurt. The shares are down 34 per cent this year compared with a 23 per cent drop in the Bloomberg Europe 500 Banks Index.

The Mittelstandsbank corporate clients unit, which reported a 35 per cent drop in second-quarter operating profit, has lost just 3 per cent its positions between 2011 and 2015 compared with 22 per cent at the private-customers business.

Negative interest rates will cut lending revenue at the two units by an additional 100 million euros (S$152 million) annually, starting in 2017, according to company fillings.

Mr Zielke's predecessor, Martin Blessing, announced measures to eliminate about 5,200 jobs and resume dividend payments. Those steps didn't stop the bank's cost-to-income ratio surging to 79 per cent in the first six months of the year from 71 per cent amid declining revenue at its consumer and corporate- banking units.

"The market will respond positively to cost savings," Neil Smith, an analyst at Bankhaus Lampe, said on Friday.

"It's an absolute must for banks anyway when interest rates are low. Automation is a huge opportunity for banks, especially in retail."

Commerzbank investors have been unnerved by the setbacks that forced Mr Zielke to abandon profit goals in August, amid a slump in trading and weak demand for loans by corporate clients. Capital buffers shrank in the second quarter and net income plunged 32 per cent.

"They need to further optimise costs and this you can do while digitising procedures - that will be key for the strategy update," said Andreas Plaesier, a Warburg analyst.

BLOOMBERG