Commerzbank Delays AGM After Board Resignation Fuels Tumult

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Commerzbank AG is delaying its annual general meeting after supervisory board member Andreas Schmitz unexpectedly resigned, further deepening a leadership crisis at the German lender.

Schmitz stepped down after several board members led by a shareholder representative for the German government raised questions about the role of HSBC Holdings Plc’s German unit in a controversial trading strategy known as Cum-Ex while he was head of that business, said people familiar with the matter. Prosecutors have been probing HSBC over the issue, and that probe also includes him, they said.

Schmitz said at the meeting late Wednesday that the questions were unfair since the HSBC probe had long been in the public domain and therefore didn’t represent a meaningful new development, the people said, asking for anonymity discussing internal details. Schmitz called for a vote of confidence and decided to step down when the board didn’t back him, they said.

Commerzbank Delays AGM After Board Resignation Fuels Tumult

Schmitz declined to comment, as did representatives for Commerzbank and the government.

Schmitz was seen as a potential candidate to succeed Chairman Hans-Joerg Vetter, who left earlier this month over health reasons. The power vacuum leaves Chief Executive Officer Manfred Knof without the backing of a strong chairman while he seeks to execute on an ambitious turnaround plan that Vetter helped develop.

Commerzbank declined as much as 4.1% on Thursday in Frankfurt, making it among the worst performers in the Euro Stoxx Banks index.

Vetter’s departure -- and the exit of Schmitz as a potential successor -- has left Deputy Chairman Uwe Tschaege, the head of the bank’s works council, in charge of the highest governance body. As employee representative on the board, he also plays a key role in negotiations with management over job cuts.

Commerzbank is now postponing the shareholder meeting “due to the ongoing restaffing on the supervisory board,” according to a statement Thursday. “The company aims to hold the AGM in the short term and publish the necessary election proposals with the invitation.” The AGM was initially planned for May 5.

Schmitz ran the German business of HSBC until 2015. A spokesman for that unit confirmed that it is one of several German banks targeted since 2016 in a probe of Cum-Ex trades, which took advantage of loopholes on dividend taxes to obtain duplicate refunds.

“The management board of HSBC Germany has always argued against a participation of the bank in so-called cum-ex transactions,” the spokesman said. The bank “didn’t intentionally participate in such deals where multiple refunds of capital gains taxes occurred.”

He said HSBC Germany is fully cooperating with authorities in the probe.

Under its new strategy, Commerzbank plans to slash a third of the domestic workforce, close almost half the retail branches and shutter roughly 30% of its foreign offices, in an effort to save 1.4 billion euros a year. Knof has promised to reach an agreement with the works council on the outlines of the cuts by May 5.

The CEO is under watch from some of the lender’s biggest investors, the German government and Cerberus Capital, whose criticism of the bank’s strategy last year precipitated the departures of the previous CEO and another chairman.

Commerzbank expects to post a second consecutive loss this year, in part because of restructuring costs. It also anticipates revenue to decline as it severs unprofitable client relationships.

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