In 2012, Commerzbank ran a TV commercial that shocked the finance world. Four years after the financial crisis, it appeared to show contrition about the meltdown and that it had learnt its lesson, at a time when other banks were still in denial.
In fact, the ad was a sort of starting gun for the bank’s rehabilitation. Commerzbank, which had to be bailed out with taxpayers’ money during the crisis, had been considered a particularly bleak case for years. But today, despite still being part-owned by the German government, it has stabilized itself and is concentrating on business.
Things have been amazingly quiet at the bank, much to the satisfaction of its approximately 52,000 employees – and particularly so for its boss, Martin Blessing.
He has headed Commerzbank for seven and half years, and the 52-year-old can safely assume his contract, which runs out in October 2016, will soon be extended. The bank’s supervisory board might do it in November. Mr. Blessing is silent on the matter, but is no doubt pleased that the decision to remain in post is his.
The bank has gained 135,000 customers in the first half year, increased revenues by 6 percent, and made more than €300 million in profit.
According to sources at the bank, Mr. Blessing seems likely to stay. The worst might be behind him. While other top managers have gone through highs and lows, the scion of a banking family experienced only lows and really low lows. His job mostly amounted to reacting, adapting and enduring.
During Mr. Blessing’s tenure, share prices collapsed by more than 90 percent, the bank has paid no dividend and its stated goals were missed by miles. In a normal company, a boss that made shareholders put up with such things would be long gone.
Not so at Commerzbank, which was bailed out to the tune of €18 billion ($20.47 billion) in 2008-2009. Taxpayers still own 16 percent of it.
In his own way, Mr. Blessing has the bank in hand; it has stayed clear of the attention of regulators, produces halfway reliable results and spares the minister of finance bad news. That’s good enough for the long-suffering employees. “We are a boring bank,” Commerzbank bankers would say, and that wouldn’t be a complaint.
But all the pressures and disappointments have also at times had a severe effect on the once easy-going and amenable Mr. Blessing. Today, he appears relieved, and he again has the upper hand and is earning like a real boss of a blue-chip DAX-index company. In the years following the crisis, he had to make do with €500,000. In 2014, he pocketed close to €2.7 million.
The bank’s new self-confidence is fed only to a limited degree by its own strength. Rival Deutsche Bank’s legal woes and subsequent damaged reputation also contributed to Commerzbank’s sense of identity. Its bankers can once again believe that they are actually on the good side, as Mr. Blessing promised in the summer of 2008 during the disastrous takeover of Dresdner Bank: That Commerzbank is the sound alternative, the customer bank, the real bank for Germany.
Although this year Commerzbank was forced to pay a €1 billion fine because of violations of U.S. trade sanctions, Deutsche Bank – Germany’s largest – easily left Commerzbank in the shadows.
Yet the new co-chief executive of Deutsche Bank, John Cryan, has just announced that there might possibly be no dividends for the year 2015. Mr. Blessing, on the other hand, wants to make a first dividend payout in years.
In 2008, Commerzbank had wanted to become second national champ with the purchase of Dresdner Bank and the real estate financer, Eurohypo. That goal has long been dead, and what remains are primarily inherited liabilities that are stored in an internal settlement bank.
The liabilities of about €150 billion were so large that skeptics were concerned about Commerzbank’s very existence. Today the mountain is only half the size, still a huge chunk, but the real estate and shipping loans will no longer drag the bank down into the abyss.
The core business with small and medium-sized enterprises and private customers is increasing only with great effort, but the first half year ran well and the bank earned more than €1 billion. The results were spurred by one-off effects and reduced risk provisioning. It isn’t likely to continue that way in the second half year. There are suspicions that the numbers look so good so that Mr. Blessing can actually stay.
But that isn’t completely fair. The bank can certainly point to successes. Its private customer business, for a long time so disastrous that the bank was considering closing it down, has now worked its way up to being a second mainstay next to corporate customers.
The bank has gained 135,000 customers in the first half year, increased revenues by 6 percent, and made more than €300 million in profit. Insiders suspect that this also has to do with a change to the internal allocation process, but without a doubt, the signs are pointing toward growth. No other bank is spending as much money on advertising and, while competitors are dissolving their network of branches, Commerzbank is holding tight to its 1,200 branches.
The path isn’t free of risks. The bank has stepped up its construction financing and increased its market share within a few years from 4 percent to 12 percent. That also works by way of the price.
Mr. Blessing has announced ambitious goals for 2016. The bank is supposed to deliver a double-digit return on equity and push the cost-return ratio to 60 percent.
In the industry, Commerzbank is considered the place where even those who were rejected elsewhere will get a loan. Insiders then also doubt that the success in private customer service will really last.
Commerzbank is also under cost pressure. It has already cut costs: Since Mr. Blessing took office, one position in five has been eliminated. Further reductions are taking place. More and more tasks are being contracted out of headquarters to external service providers, which is making the bank employees anxious.
A new boss would be able to take tougher measures, trim the bank for increased profitability and force through investments to update the bank’s information technology. Rainer Neske, who resigned as the head of Deutsche Bank’s private and business clients division, would be a logical candidate.
But what stands in Mr. Blessing’s favor is that he has come to an arrangement with the German government, which partly owns Commerzbank. He does what the government wants and it intervenes only in such delicate matters as bonuses.
But the part-government ownership can be bothersome. Mr. Blessing must regularly report to a board of nine members of parliament. And that often gets uncomfortable. They have ordered Mr. Blessing back for an interrogation on November 6.
This is reportedly mainly about Commerzbank’s involvement in dubious dealings in tax avoidance. At the end of February, investigators had searched through Commerzbank’s Frankfurt head office, because the bank had supposedly run post-box companies through its subsidiary in Luxemburg, a tax haven. The answers Mr. Blessing gave to that in spring did little to satisfy the parliamentarians. It is said that the renewed questioning will determine whether the bank is consequently pursuing a clean money policy.
There is no end in sight of the trips to Berlin for Mr. Blessing. Although interested parties make it known they would be interested in buying up the state’s shares, the state can only step out without losing money when the price is €26 or more. Currently it is at €10.
Mr. Blessing has announced ambitious goals for 2016. The bank is supposed to deliver a double-digit return on equity and push the cost-return ratio to 60 percent. The bank isn’t likely to achieve that, but Mr. Blessing can blame it on the head of the European Central Bank, Mario Draghi, and his low interest rates – and point out that others aren’t doing any better. There are enough excuses. Mr. Blessing can carry on.
Only he will decide if he will continue. Mr. Blessing almost ran the bank into a brick wall, but then stabilized it after the state stepped in and saved it. That should be enough for a new contract.
This article originally appeared in the business magazine WirtschaftsWoche. To contact the author: firstname.lastname@example.org