Half a Billion Loss at Commerzbank

Bank customers are happy about the BGH ruling on account fees, but at Commerzbank it has led to high charges. Above all, the corporate restructuring cost the Frankfurt financial institution dearly in the second quarter, and Commerzbank slipped deeply into the red again in the second quarter of 2021. The bottom line was a loss of 527 million euros. A year earlier, the institute, whose largest shareholder is the German state, had made a profit of 183 million euros in the period from April to June. Commerzbank explained the quarterly loss with so-called “restructuring expenses” of 511 million euros. This means the costs for the restructuring of the group, which has been ongoing since the beginning of the year. Hundreds of branches will be eliminated The Frankfurt financial institution wants to cut the number of full-time positions group-wide from around 39,500 to 32,000 by the end of 2024 and to almost halve the branch network in Germany from 790 to 450 locations.

240 branches closed by the end of the year
Many Commerzbank branches had already been temporarily closed during the lockdown of the past few months.

In the first quarter, Commerzbank had already set aside 465 million euros for severance payments to more than 10,000 employees who were no longer needed. Overall, the expenses for the group restructuring since the beginning of the year amount to 976 million euros. Expensive BGH ruling on bank charges But that is not the only challenge for the new Commerzbank boss Manfred Knof. The Federal Court of Justice (BGH) ruled at the end of April that banks must obtain the consent of their customers for changes to general terms and conditions. Many bank customers can now claim back part of fees that have been paid too much.

Deutsche Bank and Commerzbank have to set up high provisions due to the latest fee ruling.

In addition to the costs for the group restructuring, provisions of 66 million euros were added in the second quarter for the latest ruling by the Federal Court of Justice (BGH) on price adjustments in the private customer business. The Frankfurt money house then wrote off around 200 million euros. In addition, there are 55 million euros in provisions for the loan portfolio of the Polish mBank.Capital ratio in focusDespite the costs of the ongoing restructuring of the Group and the high one-off charges in the second quarter, Commerzbank managed to keep the so-called core tier 1 capital ratio at 13.4 percent Core capital is a particular focus of supervision. It consists of paid-in equity instruments that must meet certain requirements, as well as the open reserves. “Both components must be available to the institutions without restriction and immediately to cover risks or losses,” emphasizes the Bundesbank. Only a few days ago, Commerzbank passed the bank stress test of the European Banking Authority (EBA) and the European Central Bank (ECB). In the event of an extreme crisis, their core capital ratio would slide to 8.2 percent. Commerzbank thus held up better than the much larger Deutsche Bank with a rate of 7.4 percent. The supervisors demand at least 5.9 percent.

Could Europe’s financial institutions weather another economic crisis?

Satisfied boss, critical analyst, Commerzbank boss Knof was satisfied with the figures: “We achieved a solid operating result in the first half of the year. The implementation of the strategy is right on track. We are resolutely pressing ahead with all strategic initiatives and are ready to make even uncomfortable decisions analyst Kian Abouhossein of the US investment bank JPMorgan was more critical. The bank’s operating result missed the consensus estimate, and revenues were also below market expectations. Net interest income was slightly better than expected. Abouhossein left his rating for Commerzbank at “neutral” with a price target of EUR 5.80.
Commerzbank shares come under pressure in early share trading. At the start of trading, it posted a minus of 1.6 percent to 5.35 euros. Within a year, the paper has achieved a price increase of around 20 percent. Commerzbank BGH ruling on account fees