A Mixed Blessing

Outlook for Germany's Commerzbank: Cloudy.
  • Why it matters

    Why it matters

    Whoever succeeds Martin Blessing will have to nurture a fragile recovery at Commerzbank.

  • Facts


    • Commerzbank still has €22 billion in bad debt on its books from the shipping and real estate industries.
    • Though most of the bailout has been paid back, the German government still has a 15 percent stake in the bank.
    • Prior to the financial crisis, Commerzbank shares reached an all-time high of €224. They currently trade at €10 a share.
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Martin Blessing doesn’t exactly leave Commerzbank as good as he found it. A quick look at the share price of Germany’s second-largest bank – worth a fraction of what it was before the 2008 financial crisis – will make that clear enough.

Long the problem child of German banking and still more than 15-percent owned by the government, Commerzbank has only just begun on the difficult road to recovery. The job of turning it back into a sustainable powerhouse is less than half done.

There are clear signs that the awful situation the bank found itself in after the 2008 crisis has at least been stabilized. The praise that Mr. Blessing, the bank’s chief executive, received Monday after announcing he will leave the post in October next year is a sign of just how far he has managed to take the troubled bank in the last few years. Even the German government expressed regret that he was leaving.

“Two or three years ago, we would have found it good if Blessing had left,” the representative of a major shareholder told Handelsblatt on the condition of anonymity. The one-time critic now admits that “Blessing mastered the Herculean task of restructuring” Commerzbank.

But as managers and investors turn the page on Commerzbank’s chief executive for the past seven years and look towards his successor, many note that there are still plenty of challenges ahead.

“The resignation is finally a chance for a new start at Commerzbank, which was criminally neglected after the failure and the government bailout in 2008.”

Gerhard Shick, Green Party financial expert

The biggest uphill battle lies with the share price. While Commerzbank is on track to pay out a dividend in 2016 – its first since the 2008 crisis unfolded – its shares still remain a fraction of what they were before the financial crisis. In 2007, they were trading at an all-time high of €224. Today, they’re worth just around €10.

While Mr. Blessing is praised inside the bank for his efforts, the weak stock performance means outside investors expect something more from his successor. The bank’s share price rose 7 percent on Monday on the news that he would step down in October 2016.

Another investor complained Mr. Blessing “has not done anything for shareholders.” If shareholders hadn’t merged their stocks at a 10:1 ratio two years ago, they’d hardly be worth anything today, the investor said.

“It’s good that Blessing is leaving, enough is enough,” the representative of a large German investment fund told Handelsblatt, criticizing the repeated capital increases and the dilution of shares at the bank.

The prospects of a rise in the bank’s share price are promising. On the brink of collapse in 2008-2009, the bank received €18.2 billion in government bailouts. These have largely been repaid, and Commerzbank is making a profit again.


Martin Blessing leaves behind a mixed legacy at Commerzbank. Source: Reuters


During the first nine months of 2015, the bank earned €853 million ($938 million), 60 percent more than the same period last year. For the first time since 2007, it will pay out a dividend of 20 cents per share, or €250 million in total.

But other goals set for the bank in past years are still not being met. The core banking operation will likely miss its target of earning a 10 percent return on equity by the end of 2016.

“We are seeing to it that we come as close to it as possible – perhaps even above it,” Chief Financial Officer Stephan Engels said in a conference call with investors on Monday, presenting the bank’s third-quarter results.

Commerzbank has also come a long way in reducing the hundreds of billions in bad debts on its books. But the job is not yet finished: The bank remains saddled with €22 billion in bad debt from the shipping and real estate industries – the sectors caused the bank to nearly declare bankruptcy in 2008 and 2009.

As its biggest shareholder, the German government’s involvement in the bank’s affairs also remains a legacy of the Blessing era. Even if the bank has paid back most of its debts, the government still holds 15.6 percent of its shares.

While it has stayed out of day-to-day business, the government’s involvement remains awkward. On topics like redundancy pay and bonuses for employees, Berlin has been known to put its foot down.  It even thwarted a first-ever bonus for Mr. Blessing itself, though sources in Berlin say they are now sad to see the crisis manager leave.

Berlin’s involvement will likely remain a challenge for Mr. Blessing’s successor, assuming Germany wants to avoid saddling taxpayers with more bank bailouts. The shares it owns are currently valued at about €2.1 billion today – down from €5.1 billion when it bought them in 2009.


006 Commerzbank-01


But perhaps the biggest challenge for Commerzbank starts with finding a replacement. Mr. Blessing’s departure creates a looming leadership vacuum at the bank. There’s no clear successor, and whoever does take the job will face a number of considerable uphill struggles, despite all the notable progress that’s been made since 2008.

The names of four potential successors to Mr. Blessing have been dropped in financial and government circles. Handelsblatt’s sister publication WirtschaftsWoche on Tuesday reported that two internal candidates are the initial front-runners. If Commerzbank wants continuity, Markus Beumer is a likely pick. He currently heads the bank’s business with small- and medium-sized companies. The other option, according to WirtschaftsWoche, is Martin Zielke, who heads private banking.

For those who believe Commerzbank needs a fresh face after years of turmoil, Theo Weimer is considered a favorite. Mr. Weimer currently heads HypoVereinsbank, the German subsidiary of Italy’s UniCredit. It’s an open secret that he would gladly take the job at Commerzbank, though sources tell Wirtschaftswoche that he is not currently on the short list.

Rainer Neske, the former head of Deutsche Bank’s retail operation, has also been mentioned, though he too is not reportedly on the shortlist of Mr. Müller. There were rumors a few years ago that Commerzbank’s supervisory board chairman, Klaus-Peter Müller, had met personally with Mr. Neske. The rumors were quickly dismissed by both men, however.

A mark against Mr. Neske’s candidacy is the fact that Commerzbank’s retail operation is doing better than Deutsche Bank’s. One WirtschaftsWoche source also suggested a former Deutsche Bank manager would not fit well with Commerzbank’s culture.

According to Handelsblatt’s sources, the supervisory board has already made one personnel decision. On Wednesday, Marcus Chromik will replace Stefan Schmittmann as Commerzbank’s risk manager. Mr. Schmittmann will leave his post at the end of the year.

Gerhard Schick, the Green Party’s financial expert, speaks for many critics who view the management changes, particularly Mr. Blessing’s resignation, as a step forward.

“The resignation is finally a chance for a new start at Commerzbank, which was criminally neglected after the collapse and the government bailout in 2008,” Mr. Schick said.


Yasmin Osman covers Commerzbank and banking regulation for Handelsblatt. Anke Rezmer covers banks, investors and financial markets, while Frank Specht covers politics and regulation. To contact the authors:, and 

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