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Commerzbank, Six Years and €18 Billion Later, Scales Back in London

Michael Reuther Commerzbank_DPA
Michael Reuther, Commerzbank's director in charge of investment banking, may have to deal with a smaller London office.
  • Why it matters

    Why it matters

    Commerzbank has already sharply reduced its foreign presence since the 2008 financial crisis. But that alone hasn’t helped right the bank.

  • Facts

    Facts

    • Commerzbank halved its investment banking staff in London after the 2008 financial crisis.
    • Commerzbank, Germany’s second-largest bank, in 2009 received an €18.2 billion, or $23 billion, bailout from the German government, which still holds a 17-percent stake.
    • The bank is in the middle of its second restructuring program since 2008.
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    Audio

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Six years after Germany rescued its second-largest bank with €18 billion ($23 billion) in public funds, Commerzbank is still apparently struggling to gain traction, preparing to retrench its operations in Europe’s financial capital.

The bank is now targeting it back-office operations in London for significant cost savings, a source familiar with the situation told Handelsblatt. The move is the latest in a broader restructuring at Commerzbank, based in Frankfurt, that is expected to last until 2016.

Commerzbank’s London operation has already been stripped of much of its responsibility through cutbacks in its investment banking activities.

“There are considerations to move part of the back-office functions to another country,” one insider said. It includes non-trading sensitive functions such as information technology, office infrastructure and even cleaning services.

Commerzbank, through a spokesman, declined to comment. It remains unclear just how much of the bank’s London back office will go, and if so, where.

The focus on outsourcing comes as Commerzbank has struggled to return to profitability in a low-interest rate environment, which has hurt operating margins in its traditional businesses of private banking and commercial lending. The bank is also still working off a series of bad loans and acquisitions made ahead of the 2008 financial crisis, and which have acted as dead weight on the firm’s ability to turn a profit ever since.

Commerzbank received €18.2 billion of state aid in 2008 and 2009 and the German government continues to hold a 17-percent stake, which it is not expected to sell until at least 2016. The state aid and lessons of the 2008 crisis led the bank to shrink many of its foreign operations to refocus on lending to Germany’s Mittelstand, the network of small and medium-sized, often family-owned businesses that form the backbone of the German economy.

 

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