Troubled Bank

Cerberus May Be Just What Commerzbank Needs

  • Why it matters

    Why it matters

    Investors hope Cerberus could help boost Commerzbank’s share price, even allowing the German government to finally sell its 15-percent share in the troubled bank – possibly with a profit.

  • Facts

    Facts

    • The US hedge fund Cerberus Capital Management has purchased a 5-percent stake in Germany’s Commerzbank, which has been struggling to make money for years.
    • Cerberus invests in distressed companies with the aim of cleaning them up and selling them at a profit. There’s speculation that its presence could help do the same for Commerzbank.
    • Any increase in Commerzbank’s share price is welcome news for the German government, which holds a 15 percent stake in the bank.
  • Audio

    Audio

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Commerzbank’s Galileo HQ Building in Frankfrurt
Cerberus will have to get Commerzbank to focus on profitability. Source: Picture Alliance.

For Commerzbank, the paragon of successfully-rebounded banks might reside in Vienna. Its name is Bawag, an Austrian lender that has put losses, crises and risky speculative deals well behind it. Years ago, Bawag began to pivot away from investment banking to focus more on its retail business. This may have been a relatively boring choice from a banker’s perspective, but thanks to its rigorous frugality, Bawag has since become one of the most profitable banks in Europe.

The Austrians didn’t accomplish this feat on their own. They had help from the US hedge fund Cerberus Capital Management, which holds a majority stake in Bawag. Last week, this very same financial investor procured a modest stake in Commerzbank as well.

Cerberus owns only 5 percent of Germany’s second-largest bank, but investors hope the Americans will help to finally make Commerzbank more profitable nonetheless. After all, it’s been struggling on that front for quite some time. In spite of numerous restructurings, reconfigured strategies and savings programs, the bank’s management has only been moderately successful at turning things around – as evidenced by Commerzbank’s recent quarterly loss.

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