Commerzbank is putting back more money for loan defaults

D.he new Commerzbank boss Manfred Knof is cleaning up. A few days after taking office on January 1, he announced further burdens in the lending business and billions in amortization of goodwill. The bank, which is now only listed in the M-Dax of medium-sized stocks, is therefore likely to have slipped deep into the red last year. “After this accounting measure, we see ourselves well prepared for the future,” said Knof on Friday. “Our goal is to make the bank more profitable in the long term.”

The former Deutsche Bank manager, who had taken over from Martin Zielke at the beginning of the year, had already announced severe cuts to the employees of the bank. Knof is considered a renovator. He is supposed to get the bank back on track and it is expected that in a few weeks he will announce the cutback of thousands more jobs and hundreds of branches. The institute is currently mainly burdened by the Corona crisis. Commerzbank focuses on medium-sized companies who, according to experts, are particularly hard hit by the consequences of the pandemic.

That is why Commerzbank set aside even more money for possible setbacks in the Corona crisis. For 2020 as a whole, the bank is now anticipating risk provisioning of at least 1.7 billion euros. In autumn, she had predicted a provision for possible loan defaults between 1.3 billion and 1.5 billion euros for the full year.

Second lockdown creates bad loans

The now higher sum already includes around 500 million euros in additional provision for possible loan defaults as a result of the Corona crisis in 2021. “By increasing risk provisioning, we are responding to the ongoing corona pandemic and are well prepared for further developments this year,” said Bettina Orlopp, Chief Financial Officer. She referred to expected charges from the second lockdown.

This caused displeasure on the stock exchange. The shares sagged by a good three percent to 5.51 euros by early afternoon. It is the second time within a few days that Commerzbank has announced bad news. Shortly before the turn of the year, she announced that she would record additional costs of 610 million euros in the fourth quarter due to job cuts.

With this and the higher provision in the lending business, the loss last year will be well above the analysts’ expectations. In mid-November, they still expected an average of over 300 million euros. After nine months there was a loss of 211 million euros on the books. In 2019, Commerzbank achieved a profit of 644 million euros.

Knof has made the rebuilding of the institute a top priority. In the course of the first quarter, the manager who came from Deutsche Bank wants to present a new strategy. Observers believe it is likely that this will happen at the Supervisory Board meeting on February 10th – the day before the balance sheet for the 2020 financial year, which was still the responsibility of Knof’s predecessor Martin Zielke. Analysts assume that Commerzbank will not generate profit again until 2022.

The new boss also announced that he would write off goodwill of around 1.5 billion euros on the balance sheet, among other things because of the interest rate level in the euro zone and poor market parameters in Poland. However, this will not affect equity. The bank continues to expect an equity ratio of around 13 percent by the end of 2020. In Poland, Commerzbank operates with its subsidiary M-Bank, whose sale it had actually planned to call off in 2019. In addition to the corona crisis, legal disputes over Swiss franc loans are burdening the Polish subsidiary.


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