Blessing's Blessing

Commerzbank CEO Gets First Bonus

Martin Blessing has a little more spending money, but what about the shareholders?
  • Why it matters

    Why it matters

    Mr. Blessing’s decision to accept a €1.5 million bonus is a sign of the bank’s improving prospects, but it’s upsetting to shareholders who are still not getting any dividends.

  • Facts


    • Commerzbank CEO Martin Blessing is the lowest-paid chief executive of Germany’s top 30 listed companies.
    • Most of Mr. Blessing’s bonus is tied to the bank’s share price and the attainment of long-term goals.
    • Commerzbank has been 17-percent owned by the German government, which bailed out the bank in the aftermath of the 2008 financial crisis.
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Commerzbank’s shareholders may once again have to forego a bonus this year, but not the bank’s boss.

Martin Blessing, the chief executive of Germany’s second-largest bank, will receive a  €1.5 million ($1.62 million) bonus for 2014, his first since taking over the bank in 2008, shortly before the outbreak of the global financial crisis.

You could call it a watershed moment for the bank, which has struggled to regain its footing ever since it was bailed out in the aftermath of the financial crisis. The bank remains 17-percent-owned by the German government, though it has paid back government loans that would have prevented Mr. Blessing from getting a bonus in past years.

According to the bank’s annual report, the 51-year-old chief executive was offered, and accepted, variable compensation for the first time in 2014.

It comes after the bank reported annual profits of €264 million for the 2014 fiscal year. Mr. Blessing had always stressed that he would only accept a bonus once Commerzbank’s earnings had returned to the triple-digit millions.

But some are questioning whether the higher profits in 2014 are real.

Mr. Blessing had said he would only accept a bonus only once Commerzbank's earnings had reached the triple-digit millions. Critics note the clearing of this hurdle is partly due to some smoke-and-mirrors accounting.

Critics say the bank should have already booked losses related to the bankruptcy of Austrian bank Hypo Alpe Adria, which is in the process of being wound down.

The bank’s non-executive supervisory board, which includes two German government representatives, has held out the prospect of €1.5 million in bonus compensation for Mr. Blessing, in addition to his fixed salary of €1.3 million.

However, Mr. Blessing will only see €236,000 of the money this year. The lion’s share of the bonus – about €1 million – is tied to long-term goals, which the bank first has to attain in the coming years. Another €285,000 are tied to the share price, which has yet to recover noticeably since 2008, and will not be available for disbursement until 2016.

All told, Mr. Blessing will be paid €1.6 million in 2014, which still makes him the lowest-paid chief executive of a company listed on Germany’s blue-chip DAX stock index.

The average salary paid to chief executives of DAX-listed companies to date is €5.2 million, according to the hkp management consulting firm.

Still, Mr. Blessing’s first bonus will likely trigger controversy among the bank’s shareholders, who will come away empty-handed once again this year.

Commerzbank has remained unwilling to pay a dividend since the 2008 crisis – its prospects just aren’t good enough yet.

A big part of the problem is related to legal disputes. The bank was ordered to pay a $1.45 billion fine in the United States for doing business with Iran, in violation of U.S. sanctions, as well as for having lax money-laundering rules.

The massive fine imposed last week was higher than expected, and has eaten into the bank’s earnings for the year. In the annual report, the bank’s profits for 2014 were reported at €264 million, down from €602 million initially announced in February.

This still marks a major improvement on 2013, when the bank posted a profit of just €81 million.

But critics note that even the clearing of this hurdle is partly due to some smoke-and-mirrors accounting by the bank.

Net income for 2014 would have been even lower if Commerzbank had written off hundreds of millions in debt owed by the now-defunct Austrian bank Hypo Alpe Adria.

The Austrian bank has said it will be unable to pay any of its debts – news that has hit a number of German banks hard. Austrian authorities have set up a bad bank, Heta Asset Resolution, to unwind Hypo’s troubled assets and close the bank, which has been a thorn in the side of Austrian and German authorities ever since the 2008 financial crisis.

According to Commerzbank’s annual report, Heta Asset Resolution owes the bank about €400 million. Although the securities were covered by a guarantee from the Austrian state of Carinthia, the debt moratorium imposed by the bank invalidates that guarantee. Carinthia itself is also in danger of going bankrupt as a result of the debacle.

Commerzbank could potentially see losses of €160 million, based on the current value of the securities that Heta holds. It intends to post these charges in 2015, though it is also considering legal action. This marks a different approach from other German banks affected, such as Deutsche Pfandbriefbank and Hypovereinsbank, which already wrote off their Heta securities in the 2014 fiscal year.

There is disagreement among the auditors over whether the Heta losses should be posted in 2014 or 2015. Commerzbank argues that the law the Austrian banks are using to impose a debt haircut on creditors only came into effect in 2015. Critics point out that it was already known in 2014 that Carinthia itself would be at risk of bankruptcy in the event of Heta’s insolvency.

One thing is clear. The posting of the Heta loss in 2015 has saved Commerzbank from an unpleasant debate about Mr. Blessing’s salary.


Yasmin Osman is a financial correspondent for Handelsblatt in Frankfurt, covering Commerzbank as well as banking regulation. Christopher Cermak of the Handelsblatt Global Edition also contributed to this story. To contact the authors: and 

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