Commerzbank AG CRZBY is mulling to shutter 100 to 200 branches as part of its broader strategy review. The news was first reported by Handelsblatt business, a German daily.
With about 1000 branches, Commerzbank is one of the largest banks in Germany. However, due to the increasing popularity of Internet banking, and need to control costs, the bank undertook branch reductions and announced layoffs. As of Jun 30, 2019, it had about 40,700 employees but plans to reduce headcount to 36,000 by 2020.
The move forms part of the bank’s efforts to cut down costs as it factors in the current scenario of weak German economy and expectations of lower rates. These unfavorable economic conditions are likely to hamper its growth.
Chief Executive Officer Martin Zielke is set to make new targets for 2020. Bloomberg reported that the discussions on new targets are likely to begin in late September.
Also, considering the current economic conditions in Germany, domestic lenders are moving away from investment banking business to focus on other profitable segments.
Overall, the performance of investment bankers is likely to be soft in the quarters ahead as political uncertainties and geopolitical tensions continue to weigh on the global economy.
Commerzbank is not the only German bank that is considering restructuring. Its rival Deutsche Bank DB, with which merger talks collapsed earlier this year, had announced major overhaul in July. As part of its plans, Deutsche exited the global Equities Sales & Trading business, and plans to reduce headcount by about 18,000 employees by 2022-end to save costs.
UBS Group UBS has recently been in news for planning to restructure its investment banking unit in order to boost performance. It seeks to improve connection between dealmakers and the wealth management unit.
Shares of Commerzbank have lost 18.1% on the NYSE year to date compared with the industry’s decline of 4.6%.
The stock currently carries a Zacks Rank #4 (Sell).
A better-ranked stock in the finance space is BanColombia S.A. CIB, carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for BanColombia has been raised 2.7% for the current year in the past 30 days. The company’s share price has gained 32.8% so far this year.
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