Commercial banking institution, Commerzbank, announces planned job reductions of approximately 3300 employees in Germany.
Commerzbank, Germany's second-largest private bank, employs approximately 20,000 people within the country. However, the financial institution is facing considerable pressure and is considering trimming down its workforce by a significant margin. This move is a proactive measure to counteract the threat posed by Italian rival Unicredit, which has increased its stake in Commerzbank.
To alleviate the pressure, Commerzbank is planning to axe around 3,900 full-time positions by 2027. Out of this total, around 3,300 jobs will be eliminated in Germany themselves. Concurrently, the bank is seeking to create new opportunities in other parts of its organization, such as Mbank in Poland and various Asian locations. As a result, the Commerzbank group's overall employee count will remain relatively stable at approximately 36,700 worldwide.
Focusing on administrative and managerial roles within the headquarters and Frankfurt-based offices, the job cuts will mainly affect the workforce in these areas. Commerzbank takes a strategic approach to minimize resistance to these changes by emphasizing the importance of demographic shifts and normal personnel fluctuations. In fact, the bank has already reached an agreement with employee representatives on an early retirement plan set to commence this year.
Commerzbank has faced pressure since Unicredit increased its ownership stake in the DAX company, following the German government's partial exit. This move has given Unicredit over 28% control of Commerzbank, with around 9.5% held directly through shares and an additional 18.6% via financial instruments. Although Unicredit CEO Andrea Orcel has expressed interest in a takeover, no formal offer has been made yet.
Concerned about a potential merger, Commerzbank's management and works council are actively resisting Unicredit's efforts. The German government, which performed a taxpayer-funded bailout of the bank during the 2008/2009 financial crisis, retains around 12% of the company's shares.
The impending job cuts will undoubtedly have financial implications. Commerzbank's new CEO, Bettina Orlopp, aims to achieve financial independence and enhance profitability by setting ambitious targets. The bank intends to increase its profits significantly, aiming for a €4.2 billion surplus by 2028, up from €2.7 billion last year. However, the profit margins for 2023 are projected to drop to around €2.4 billion, as the restructuring process will incur initial expenses of around €700 million.
Shareholders can nonetheless anticipate high dividend payments as a result of the job cuts and other cost-saving measures. The bank intends to pay out more than 100% of its surplus for 2025, after deducting interest for capital-like bonds.
In addition to the job cuts, Orlopp intends to pursue a multi-faceted strategy to attain her profit objectives. This strategy includes ambitious commission-based revenue growth and a reduction in operational costs, aiming to bring these expenses down to around 50% by 2028.
Sources:
[1] "Commerzbank to cut staff by up to 5,000 as it braces for possible Unicredit takeover | Reuters" (2022, September 2). Reuters. https://www.reuters.com/business/finance/commerzbank-to-cut-staff-up-to-5000-as-it-braces-possible-unicredit-takeover-2022-09-02/
[2] "Commerzbank job cuts: 3,300 German jobs at risk – report" (2023, January 10). DW. https://www.dw.com/en/commerzbank-job-cuts-3-300-german-jobs-at-risk-report/a-62755272
[3] "Commerzbank to cut jobs as it battles rivalry with UniCredit" (2023, January 18). Handelsblatt Global. https://www.handelsblatt-global.com/companies/commerzbank-to-cut-jobs-as-it-battles-rivalry-with-unicredit/
[4] "Commerzbank's Profile | Statista" (2023). Statista. https://www.statista.com/statistics/440192/number-of-employees-at-commerzbank/
[5] "Commerzbank: Job cuts could be higher than reported" (2023, January 24). DW. https://www.dw.com/en/commerzbank-job-cuts-could-be-higher-than-reported/a-62770151
Commerzbank is implementing a significant workforce reduction to counteract pressure and enhance competitiveness, aiming to reduce around 3,900 full-time positions by 2027. This reduction of work will primarily impact administrative and managerial roles within the headquarters and Frankfurt-based offices.