Friday, January 8th, 2021
Depreciation and provision
Commerzbank frightens investors again
Manfred Knof has only been in office for a few days – and the boss already has bad news for Commerzbank employees and shareholders. Due to the corona pandemic, risk provisions must be increased. It was only in December that the hope of a profit had vanished into thin air.
The new Commerzbank boss Manfred Knof is cleaning up. A few days after taking office, he announced further burdens in the credit business and billions in amortization of goodwill. The second largest German private bank is therefore likely to have slipped deep into the red last year. "After this accounting measure, we see ourselves well prepared for the future," explained Knof. "Our goal is to make the bank more profitable in the long term."
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. In the course of the first quarter, the manager who came from Deutsche Bank wants to present a new strategy. Insiders believe it is likely that this will be the case at the supervisory board meeting on February 10th – the day before the balance sheet for the 2020 financial year, which Knof's predecessor Martin Zielke was still responsible for. Then it will probably cut thousands more jobs and hundreds of branches to announce.
Second bad news
Last year, risk provisioning for bad loans of at least 1.7 billion euros was incurred, the bank said. So far, 1.3 to 1.5 billion euros have been promised. The new amount also includes 500 million euros for impending loan defaults in the current year.
"With the increase in risk provisioning, we are reacting to the ongoing corona pandemic and are well prepared for further developments this year," said CFO Bettina Orlopp. She referred to expected charges from the second lockdown.
This caused displeasure on the stock exchange. 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 with 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, the bank had earned 644 million euros.
Probably only in the black again in 2022
Analysts assume that Commerzbank will only return to profitability in 2022. For months, the institute, whose largest shareholder has been the German state since the 2008/2009 financial crisis, has been struggling to tighten the austerity measures announced in autumn 2019.
Knof also announced that, among other things, due to the interest rate level in the euro zone and poor market parameters in Poland, goodwill of around 1.5 billion euros on the balance sheet will be written off. 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 mBank, 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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