UPDATED: Aug. 4, 2020: Commerzbank elected Hans-Jörg Vetter as its next chairman Monday, over objections from activist investor Cerberus that Vetter may not be “the right person for this job or has the right experience for it.”
In an email seen by the Financial Times, Cerberus expressed "serious doubts" about Vetter, who previously served as chief executive of state-owned German lender LBBW.
Among Vetter's first expected moves is to find a CEO to replace Martin Zielke, who resigned last month alongside former chairman Stefan Schmittmann.
----
Commerzbank CEO Martin Zielke and board chairman Stefan Schmittmann offered to resign Friday, bowing to ratcheting pressure from the bank's second-largest shareholder, Cerberus, which made clear it remained unimpressed by the bank's plan to return to profitability.
"The bank needs a profound transformation and a new CEO, who will get the necessary time from the markets to implement a strategy," Zielke said in a statement, according to Bloomberg. "Even if we made strategic progress, the financial performance of the bank has been and is unsatisfactory. And as CEO I bear the responsibility for that."
Germany's second-biggest lender has struggled to find a path forward since a proposed merger with its larger rival, Deutsche Bank, fell through last year.
Both banks have pitched recovery efforts. Deutsche laid out a plan last year to cut 18,000 jobs and spin off $83 billion in assets it no longer wants, while promising a return on equity of 8% by 2022.
Meanwhile, Commerzbank aimed for 4% returns by 2023 and, late last month, said it is considering cutting 7,000 jobs and closing 400 branches. That expands on the bank's strategy last year to cut 4,300 jobs, close 200 branches and sell its majority stake in Poland's mBank. Commerzbank abandoned its sale of mBank in May, saying the coronavirus made it impossible to get a good price.
Discord with Cerberus has been brewing for some time. The private equity giant, describing Commerzbank's performance as "disastrous," last month demanded the bank appoint two of its nominees to the supervisory board. The bank refused. Cerberus has since said the 7,000-job plan is not enough.
And Cerberus is not the only investor whose patience has worn thin. The German government, which holds a 16% in the bank it bailed out during the 2007-08 financial crisis, commissioned consultancy firm Boston Consulting Group last year to suggest how to reshape the bank. The group urged Zielke to increase his cost savings target by a factor of three, Bloomberg reported.
The European Central Bank has also pressed Commerzbank to speed up its restructuring efforts.
The bank posted a €295 million ($332 million) loss in the first quarter, and shares are down 25% on the year. In the longer term, shares were worth €26 apiece when the German government bought its stake. That figure has plummeted to €4.13 as of Friday, according to The Wall Street Journal.
Zielke, whose contract runs through November 2023, is expected to submit his resignation for approval Wednesday. Schmittmann’s resignation is effective Aug. 3.
"The sudden departure of Commerzbank's chairman and chief executive calls for an orderly process of filling the vacant positions," a Cerberus representative said in an emailed statement seen by Bloomberg. "First, a new chairman has to be found, followed by a formal process to find a successor for the CEO, to be executed by the supervisory board."
The reshuffling at Commerzbank comes merely a week after the collapse of Germany’s largest challenger bank, Wirecard. The fintech filed for insolvency in late June after saying €1.9 billion it previously reported as cash probably never existed. The scandal led to the arrest of CEO Markus Braun.
Wirecard’s bank subsidiary won't be a part of the bankruptcy proceedings — and among its potential saviors is a curious choice: Deutsche.
Germany's largest bank has corresponded with BaFin, Wirecard Bank's regulator — along with the management board of the challenger's banking unit — about possible next steps to acquire all or part of Wirecard Bank, a Deutsche spokesman told Bloomberg by e-mail, without further details.
Deutsche reportedly hasn’t made a final decision. If it were to buy Wirecard Bank and Wirecard Bank were to then file for insolvency, Deutsche would be on the hook to help make Wirecard Bank whole under Germany’s deposit insurance rules.
Deutsche and Wirecard explored a potential tie-up in 2019, but preliminary discussions broke off, according to Bloomberg.
