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Commerzbank to Slash 4,300 Jobs as Zielke Steps Up Cost Cuts

Steven Arons
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Commerzbank to Slash 4,300 Jobs as Zielke Steps Up Cost Cuts

(Bloomberg) -- Commerzbank AG is planning to cut 4,300 jobs as part of a new strategic plan that will also see the bank sell a stake in its Polish mBank unit to reduce risk and help pay for the measures.

Germany’s second-biggest listed bank plans to close 200 branches as part of the measures, and buy the 18% it doesn’t yet own in its online bank Comdirect Bank AG, according to a statement Friday. It’s the bank’s biggest overhaul since Chief Executive Officer Martin Zielke three years ago announced his strategy of focusing on lending to retail and corporate clients in its home market.

Since then, a weaker economy and the prospect of even lower interest rates have forced Zielke give up many of the mid-term targets in his current turnaround plan, which runs through 2020. That plan had aimed to cut headcount by 7,300, though the bank since revised that number to less than 5,300. Merger talks with Deutsche Bank AG collapsed earlier this year.

The new measures do “little to enhance the lender’s investment case or appeal to a potential suitor,” said Philip Richards, an analyst at Bloomberg Intelligence. It “doesn’t suggest earnings recovery or a credible stand-alone plan is in the offing.”

Commerzbank rose as much as 3.5% before paring gains to 0.5% by 4 p.m. in Frankfurt trading. The shares fell to a record low last month as Germany’s economic contraction and expectations for lower interest rates threaten to undercut Zielke’s strategy. Bloomberg reported last month that the bank was considering more job cuts.

Commerzbank said that further group-wide job cuts were “regrettable but inevitable.” The sale of mBank will reduce risk-weighted assets by about 17 billion euros ($18.7 billion), it said.

Zielke earlier this year pledged average revenue growth of 3% per year, though Friday’s announcement merely says the bank will have higher revenue “by 2023.” The bank also set a new target for a return on tangible equity of more than 4% in the medium term.

The plan to cut about a fifth of the bank’s German branches is a significant departure from a promise to keep the network intact. Retail head Michael Mandel previously emphasized the promise in several interviews and made it a centerpiece of the bank’s marketing campaigns.

The measures announced Friday are a draft proposal and the bank’s supervisory board still needs to sign off next week, Commerzbank said. The sale of mBank would be subject to regulatory approval.

(Updates with details about branch cuts in penultimate paragraph)

To contact the reporter on this story: Steven Arons in Frankfurt at sarons@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian Baumgaertel

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