Commerzbank is losing both its chairman and chief executive in an escalating row with private equity group Cerberus over its strategy.
Germany’s second-largest listed lender said on Friday that Stefan Schmittmann would resign as chairman by August 3 and chief executive Martin Zielke had also offered to step aside as the bank shuffles its leadership team to deal with the demands of Cerberus, its second-biggest shareholder.
Last month Cerberus launched an attack on Commerzbank’s leadership, calling for “significant change at the supervisory board, the management board and the company’s strategic plan” to stop a “downward spiral” caused by what the investor said were bloated costs, low profits and managerial inaction.
The German lender was bailed out by taxpayers during the financial crisis a decade ago and has for years suffered from high costs, measly returns and poor revenue growth.
“I want to open the way for a fresh start,” said Mr Zielke in a statement, adding that the lender needed a “profound transformation” and a new chief executive to implement it. He acknowledged that Commerzbank’s financial performance was “unsatisfactory” and that he as chief executive was responsible.
Mr Schmittmann warned that the coming change at Commerzbank would require “a lot of strength and effort” and should not be overshadowed by recurring debates over leadership.
In a letter to Mr Schmittmann last month, Cerberus accused Commerzbank of “negligence and arrogance”, adding that the bank’s current strategy was “flawed and unambitious” as well as poorly implemented.
Two months before Cerberus openly attacked Commerzbank’s management, the German government — the bank’s biggest shareholder with a stake of more than 15 per cent — replaced both of its representatives on the supervisory board in a move that reflected Berlin’s mounting frustration with its lacklustre performance.
In the first quarter of 2020, Commerzbank swung to a net loss of €295m as measures to control the fallout from the coronavirus pandemic hit earnings by close to €500m.
After merger talks with larger rival Deutsche Bank failed last year, Mr Zielke unveiled a new restructuring plan that targeted a return on equity of 4 per cent by 2023, seen as an underwhelming goal by investors and regulators and well short of Commerzbank’s estimated cost of capital of around 10 per cent.
Mr Zielke, who was appointed Commerzbank’s chief executive in 2016, had a contract until November 2023.
The bank announced the slashing of 2,300 jobs and the closure of one in five branches but later said that negotiations with worker representatives over the implementation of the job cuts would only begin this summer. A key element of the strategy, the sale of Commerzbank’s Polish subsidiary mBank, was called off after the German lender failed to woo buyers willing to pay an attractive price.
The European Central Bank, the region’s top financial regulator, late last year urged Commerzbank to speed up its restructuring efforts, expressing concern about humdrum returns.
Boston Consulting Group, which evaluated Commerzbank’s strategy on behalf of the German government, also concluded that the lender should step up its restructuring.
Commerzbank’s new chief financial officer Bettina Orlopp earlier this year vowed to “look everywhere” in an attempt to cut additional costs.
Mr Schmittmann on Friday conceded that the strategy unveiled in September last year failed to convince investors, pointing to Commerzbank’s share price which fell by close to 20 per cent over that time, underperforming the wider German market as well as rival Deutsche Bank.