Germany’s Commerzbank is reportedly preparing to slash more jobs as the company continues to fend off criticism from one of its prominent stockholders.
Stefan Wittmann, who represents labor on Commerzbank’s supervisory board and is an official at Germany’s Verdi union, said on Monday that the Frankfurt-based lender will unveil more branch closures and job cuts, when it reveals its new strategy review in August along with second quarter results.
Last September, Commerzbank announced 2,300 job cuts and the closure of 200 branches to reduce the total number to 800. The bank is now planning to swing the axe again.
“There will be considerably more branch closures and more job losses than previously announced,” Wittmann said.
Wittmann also criticized demands made by U.S.-based shareholder Cerberus Capital Management, a private equity firm, to place two of its handpicked representatives on the supervisory board at Commerzbank, Germany’s second largest bank. Cerberus has also demanded that the bank enact aggressive cost cuts and change its strategy.
Commerzbank has already turned down Cerberus’ demand for the board seats. “We don’t have any vacancies,” Commerzbank’s Chairman Stefan Schmittmann said in a letter to Cerberus. “For the time being we therefore don’t see neither the necessity nor a basis for a change regarding the composition of the supervisory board.”
Wittmann added: “Cerberus’ approach is rude and inappropriate.”
Since Cerberus purchased a 5% stake in Commerzbank in 2017, the bank’s shares have plunged about 60% due to very low interest rates and intense competition.
“The window of opportunity to address the challenges faced by Commerzbank is rapidly closing,” Cerberus wrote in a letter to the bank. “The precarious situation of Commerzbank requires swift and decisive action now.”
Commerzbank, which is still 15% owned by the German government in exchange for a bailout it received more than a decade ago, posted a loss of about $333 million in the first quarter and warned that it might not make a profit this year.
Cerberus is reportedly going to aggressively push for changes at beleaguered Commerzbank, which has held some 70 meetings with Cerberus officials.
Cerberus has characterized Commerzbank’s performance as “disastrous.”
“Management’s ill-conceived and poorly executed attempts to prevent Commerzbank’s demise display a level of negligence and arrogance we are no longer willing to tolerate,” Cerberus wrote in its letter to the bank.
Among its other woes, Commerzbank suspended its 2019 dividend plans, cancelled the proposed sale of its Polish subsidiary lender mBank, dealt with credit rating downgrades, and lost a crucial sponsorship deal with a local soccer team to Deutsche Bank.
Activist investors are looked askance in Germany on the assumption that they are focused on short-term profit rather than on a company’s long-term success.
Without mentioning Cerberus by name, Commerzbank CEO Martin Zielke said last week: “We continue to work on cost management where we see additional potential beyond current plans.”
Cerberus also holds a 3% stake in Deutsche Bank, and last year advocated for a merger of Germany’s two largest banks.