FRANKFURT, Germany (AP) -- Germany's Commerzbank says it's making progress in reshaping its business but still has "a long way to go" as higher shipping loan losses and low interest rates continue to squeeze profits.
The bank provided detail Friday on its fourth-quarter earnings announced Feb. 4. It lost €716 million ($954 million) largely due to one-time losses of €185 million on its sale of Bank Forum in Ukraine and €560 million in tax accounting charges. For all of 2012, net profit was a meager €6 million as loan losses increased and interest earnings shrank.
The bank says it made progress in winding down businesses that it is getting rid of, in commercial real estate and shipping finance. Its non-core assets division where it has put those activities shrank by €9 billion to €151 billion during the quarter.
The bank says losses from remaining ship finance loans that aren't being repaid helped boost total loan losses to €614 million in the quarter, from €381 million in the same quarter a year ago. Meanwhile net interest income fell to €1.38 billion from €1.62 billion a year ago, as rock-bottom interest rates narrow the difference between what the bank pays depositors and what it must pay to borrow.
Commerzbank is refocusing its business by dropping riskier activities, to meet new regulatory demands for banks in the wake of the 2007-2008 financial crisis and a tougher business environment. The bank is running down non-core businesses in commercial real estate and government finance and as required by EU authorities to offset the state aid it got when it was rescued by the German government, which still owns 25 percent. It is also decreasing risky loans and investments in response to requirements for big banks to hold back more capital against losses.
Some of the bank's businesses, particularly its core business lending to mid-size companies in Germany, are doing better. The German business finance division showed very low loan losses of only €30 million for the whole year and raised operating profit to €1.65 billion from €1.59 billion.
The bank is cutting costs and says it will drop 4,000 to 6,000 jobs through 2016.
CEO Martin Blessing said in a statement that "in 2012 we fulfilled the prerequisites for the realignment of the bank"
"Initial measures are taking effect, but one things is clear: There is a long way to go," he said.