Commerzbank Will Record $550 Million Charge for Job Cuts

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Commerzbank AG will post a restructuring charge of 470 million euros ($550 million) in the first quarter for its job-cuts program, adding to about a billion euros of related costs booked previously.

The German lender is taking the charge to account for 1,700 job cuts agreed with the works council, it said in a statement on Thursday. New Chief Executive Officer Manfred Knof has vowed to eliminate 10,000 positions in total in Commerzbank’s home market to improve profitability in a restructuring that will cost about 1.8 billion euros.

Knof, who took over in January, has embarked on a series of cost cuts after two efforts by his predecessor Martin Zielke to grow his way to profitability through client acquisitions failed. The new CEO is shedding about a third of the German workforce, closing almost half the retail branches and shuttering roughly 30% of the bank’s foreign offices, in an effort to save 1.4 billion euros a year.

Meanwhile, the lender’s top governance body was plunged into further turmoil after three supervisory board members stepped down following the resignations of the chairman and another board member in March.

Victoria Ossadnik, Rainer Hillebrand and Tobias Guldimann have decided to leave Commerzbank’s supervisory board, the bank said in another statement later on Thursday.

Commerzbank on Sunday nominated a candidate for the chairman role, Helmut Gottschalk. Three of the remaining board vacancies will be filled by former DZ Bank executive Frank Westhoff, Autobahn GmbH supervisory board member Daniela Mattheus and former Deutsche Telekom AG executive Caroline Seifert, it said Thursday. The four nominees will be voted on by shareholders at the bank’s annual general meeting scheduled for May 18.

Lloyd’s of London Ltd Chief Financial Officer Burkhard Keese will likely also join the supervisory board, but this will only be announced at a later stage, a person familiar with the matter said. Commerzbank said it will propose another candidate, who it cannot yet identify for formal reasons, when invitations for the shareholder meeting will go out.

Handelsblatt first reported the new board members.

The unprofitable German bank is trying to move on from its latest boardroom crisis. Hans-Joerg Vetter resigned as chairman in March for health reasons and the potential candidate to replace him, Andreas Schmitz, abruptly stepped aside last week. That leaves Knof without the backing of a strong chairman while he seeks to execute the turnaround plan that Vetter helped develop.

Schmitz left after a supervisory board meeting last week in which several members led by the government representative raised questions about a probe by prosecutors against him, people familiar with the matter have said. Schmitz called for a vote of confidence in him that he lost and then decided to resign, they said.

Ossadnik and Hillebrand were the two board members in addition to Schmitz himself who backed him in that vote and they later decided to leave the board as well, according to a FAZ report late Wednesday which first reported their departures. Guldimann is leaving after failing to become chairman last summer when Vetter was appointed, FAZ wrote.

The German government is Commerzbank’s largest shareholder by far and one of its two supervisory board representatives, Jutta Doenges, played a crucial role in appointing Vetter last year. That appointment followed the joint resignation by Vetter’s predecessor, Stefan Schmittmann, and the then-CEO Zielke after a barrage of public and private criticism of the lender’s strategy by the government and another big investor, Cerberus Capital Management.

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