Advertisement
Singapore markets closed
  • Straits Times Index

    3,224.01
    -27.70 (-0.85%)
     
  • Nikkei

    40,369.44
    +201.37 (+0.50%)
     
  • Hang Seng

    16,541.42
    +148.58 (+0.91%)
     
  • FTSE 100

    7,952.62
    +20.64 (+0.26%)
     
  • Bitcoin USD

    70,306.02
    -1,067.16 (-1.50%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,254.35
    +5.86 (+0.11%)
     
  • Dow

    39,807.37
    +47.29 (+0.12%)
     
  • Nasdaq

    16,379.46
    -20.06 (-0.12%)
     
  • Gold

    2,254.80
    +16.40 (+0.73%)
     
  • Crude Oil

    83.11
    -0.06 (-0.07%)
     
  • 10-Yr Bond

    4.2060
    +0.0100 (+0.24%)
     
  • FTSE Bursa Malaysia

    1,536.07
    +5.47 (+0.36%)
     
  • Jakarta Composite Index

    7,288.81
    -21.28 (-0.29%)
     
  • PSE Index

    6,903.53
    +5.36 (+0.08%)
     

Commerzbank Proposes Strategic Overhaul to Boost Profits

Germany-based Commerzbank AG CRZBY is planning a strategic business overhaul with an aim to boost profits amid a challenging operating backdrop. The bank intends to close branches, slash workforce and restructure operations.

The company’s board of managing directors has submitted the plan to the Supervisory Board and discussions will be held with the same later this week, before being presented at the press and investors conference on Sep 27.

Plan Details

Commerzbank plans to digitalize its operations, strengthen mobile banking capabilities and invest in technology upgrades. For this, the bank expects to incur approximately €750 million ($844 million) of charges.

Further, the proposal includes the merger of comdirect bank AG into Commerzbank. At present, Commerzbank holds 82% stake in comdirect bank. The company plans to offer 25% premium for the remaining comdirect bank stake. Also, Commerzbank, while maintaining the nationwide presence, will be closing around 200 branches (nearly 20% of its current network).

All these efforts will result in roughly 4,300 job cuts across the company. However, the company will likely be hiring around 2,000 employees in strategic areas. Therefore, the net headcount reduction is expected to be 2,300. For all these streamlining efforts, Commerzbank will incur restricting expenses of €850 million ($956 million).

In addition to these, Commerzbank proposes to divest its 69.3% stake in mbank S.A., its Poland-based subsidiary. This divestiture will likely lower the bank’s workforce by another 6,600. The planned sale will be subject to regulatory approvals.

The company stated that the sale will lead to “a faster implementation of its strategy and the associated investments.” The divestiture will also result in reduction in Commerzbank’s risk-weighted assets by nearly €17 billion ($18.7 billion).

Medium Term Targets Set

The implementation of these strategic efforts will support Commerzbank in achieving higher revenues by 2023, even if market conditions deteriorate further. Further, the bank expects a cost base of €5.5 billion in 2023 subsequent to the sale of mBank.

Following the implementation of the strategy, Commerzbank targets to achieve return on tangible equity ratio of 4% in the medium term. This will enable the company to pay out regular dividends. The company’s capital ratio is expected to remain in the 12-13% range over the same time frame.

Our Take

Commerzbank’sinitiatives are expected to support profitability and help counter slowdown being faced by the eurozone. The failed merger talks with Germany’s largest bank, Deutsche Bank DB in July are also one of the reasons for this overhaul.

Shares of Commerzbank have lost 6.4% on NYSE so far this year against the industry’s rise of 2.9%.



Currently, Commerzbank carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Banks across the globe including UBS Group AG UBS, Barclays BCS, HSBC Holdings and Citigroup are undertaking measures to mitigate tough operating backdrop and lower interest rates. Banks are cutting jobs and streamlining businesses as part of their growth strategy.

Wall Street’s Next Amazon

Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.

Click for details >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Deutsche Bank Aktiengesellschaft (DB) : Free Stock Analysis Report
 
Commerzbank AG (CRZBY) : Free Stock Analysis Report
 
Barclays PLC (BCS) : Free Stock Analysis Report
 
UBS Group AG (UBS) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research