FRANKFURT (dpa-AFX) - German lender Commerzbank AG (CRZBY.PK) said Thursday that it will cut almost 10,000 jobs, stop paying dividends for the time being and merge two big units as part of a restructuring to become profitable on a sustainable basis by 2020.
The bank, Germany's second largest, said that to cover its restructuring costs in the region of 1.1 billion euros, it will cease dividend payments for the time being and retain its full earnings.
This is Commerzbank's biggest overhaul following its 18 billion euros bailout by the government during the 2008 global financial crisis.
Commerzbank has presented its draft strategic and financial objectives until 2020 to the Supervisory Board for consideration. The Board of Managing Directors will decide Friday on the strategic objectives after discussions with the Supervisory Board.
As part of its efforts to sustainably increase profitability by the end of 2020, Commerzbank will focus on its core businesses and digitalise 80 percent of the relevant processes. The bank will focus on two customer segments, 'Private and Small Business Customers' and 'Corporate Clients.'
'The focus on the core business, with some business activities being discontinued, and the digitalisation and automation of workflows will lead to staff reductions amounting to around 9,600 full-time positions,' Commerzbank said.
However, the lender noted that about 2,300 new jobs will be created in areas of business growth and therefore, the net number of jobs shed will amount to around 7,300 full-time positions.
Further, Commerzbank will merge the Mittelstandsbank and Corporates & Markets segments, while trading activities in investment banking will be scaled back. The company noted that the move will reduce earnings volatility as well as regulatory risk and free up capital to be invested in core client businesses.
As a result of the goodwill and intangible assets of both Corporates & Markets and Mittelstandsbank being subject to an impairment test, Commerzbank expects about 700 million euros to be written off in the third quarter of 2016. Consequently, the company will likely record a net loss for the third quarter.
Despite the goodwill write-offs, Commerzbank expects a small net profit for 2016 as a whole. The bank aims for a net return on tangible equity or RoTE of at least 6 percent by the end of 2020.
In Germany, Commerzbank shares are trading at 5.96 euros, down 0.62 percent, on a volume of 13.11 million shares.
Copyright RTT News/dpa-AFX