For Martin Zielke, online and analog both have their place in the world. Commerzbank’s boss is embracing digitization of the bank’s processes, while maintaining its extensive branch network. To drive this point home, Mr. Zielke wore two timepieces during his Handelsblatt interview: a mechanical wristwatch on one arm, and a digital fitness wristband on the other. Truth be told, Mr. Zielke has precious little time for jogging, as the bank is undergoing a massive restructuring that has rocked its bottom line. In the second quarter of 2017, Commerzbank posted a gaping loss of €637 million.
Handelsblatt: Martin Zielke, it’s been 10 years since the financial crisis began. How stable is the banking system today?
Martin Zielke: I find it hard to gauge it in absolute terms. But at Commerzbank we’ve drawn the right conclusions from the crisis and are now fully functional again. We want to make the bank simpler and better, and focus on our strengths.
Does that mean: we’ve put the crisis behind us, and everything is fine in the banking world?
I didn’t say that. If we’ve learned one thing, it’s that the cause of the next crisis will be different from the last time. Of course there may again be negative developments. But we are better prepared.
The German banking market is in radical upheaval.
The European Central Bank reacted to the crisis with ultra-low interest rates and trillions in bond purchases. How do you rate the work of Mario Draghi?
I have great respect for the ECB. Its bond-buying program created room for maneuver for Europe’s politicians to implement reforms. The medicine worked. But, like any medicine, there are side effects, and they are getting worse.
So it’s time to end the treatment?
At some point you have to come off the medication, and the right time for that is now. The United States has already begun. Now we have to get ready for that – not just the banks, but also companies and individual savers. I am optimistic this will work.
What will happen to Commerzbank if interest rates remain at very low levels?
Don’t worry about that. We’ve prepared for that, and we’ll cope.
But your earnings are drifting downward.
The German banking market is in radical upheaval. Low interest rates are just one factor in that. Customer behavior and digitization also have a role. It is simultaneously a risk and an opportunity. At Commerzbank we’re concentrating on the opportunities as they arise – above all digitization. We are Germany’s disruptive big bank. And we’re succeeding at that.
For this year you’ve promised a “moderately positive result.” But you can’t really be happy with that, can you?
Of course we would earn more if interest rates were higher. But at the moment, we have a great opportunity to attract more customers. That is a clear investment for the future…
… one that doesn’t seem to be paying off right now.
If we were in a sector with Amazon, Google or Facebook, you wouldn’t ask me that question. Those kind of disruptions are not about short-term success, but strategic alignment for the future. Journalists used to accuse us bankers of short-termism. So you shouldn’t criticize us for acting long-term now.
But your long-term goals are not particularly ambitious either. In 2020, your return on equity is supposed to be six percent. Is this a new, more modest mindset?
Six percent with unchanged interest rates, eight if they go up. You have to look at the premises of our thinking. The level of interest rates has a massive influence on the bank’s results. Precisely because we don’t know what interest rates will be in the future, we don’t want to just throw any old figures out there.
Martin Blessing, your predecessor, promised a return on equity of 10 percent.
We have achieved our staff reduction targets and improved our capitalization in a environment that has been very difficult for banks. But we had different macroeconomic assumptions.
Has that to do with the fact that Commerzbank regularly missed its targets in the past?
That’s not true. We achieved our fundamental goals.
In other words, you miscalculated.
We weren’t the only ones. That’s why we aren’t going to start gambling with our targets. And they understand that very well on the capital markets. We want to restructure the bank so we can put the opportunities available to best use. This year we’ve already come a long way towards that.
You’ve reached an agreement on a thousand job cuts and written down €807 million in restructuring costs. Does that mean that the worst is over and we’ll see better results this year, at long last?
I’d rather not speculate about that. 2018 will be another transitional year for Commerzbank. Restructuring is still happening, we’re still a long way from our goal.
But other banks are reaching theirs. For example, ING-Diba earned three times as much as you did in 2016, although it has a lot fewer customers.
That’s a totally different business model. We are the largest bank in terms of business and private customers. Our growth has nothing to fear from comparison with competitors. Of course there are competitors who are doing well. But we are conquering a market sector that has a lot of leverage. It would be careless not to take advantage of this opportunity for the future.
Is ING-Diba more profitable because it has no branches?
Our branches are our strength: It’s where we get around 70 percent of our new customers. And that is precisely where our competitors are pulling out of the market. Where others walk away, we stay and win new customers.
Journalists used to accuse us bankers of short-termism. So you shouldn’t criticize us for acting long-term now.
The German market is dominated by savings banks and cooperative banks, which have two-thirds of the market. Can Commerzbank survive on its own against this dominance, or will you have to merge with Deutsche Bank sooner or later?
I understand that you find this a fascinating question. But I have to disappoint you. I don’t share your basic presumption: “You can’t manage this.” We sure as hell can. And that is not a theoretical debate, it’s our lived experience. Consolidation is not a cure-all. You can also grow organically.
So after flirting in the summer of 2016, when you held exploratory talks about a merger, now you don’t see any need for talks with John Cryan, Deutsche Bank’s CEO?
My goal is to make our bank as successful and strong as possible. Right now I’m not interested in anything else. And I’ve spent more time on speculation in this conversation than I normally do in a working day.
But the danger of becoming a takeover target must be of interest to you, in strategic terms.
It is not my job to engage in hypothetical speculation. It is our job to hold our own in tough competition and to successfully provide banking services for companies and private individuals. There’s a lot to do in that regard – and right now, there are a lot of opportunities.
Opportunities to make acquisitions are not something you’ve taken advantage of lately. You pulled out of two separate bidding processes. Is Commerzbank actually in a position to make acquisitions, or is it still traumatized by the Dresdner Bank takeover in 2008?
Now we’ve gone back to speculation. Let’s look at the facts. We want to grow our commercial and private business. We’re managing that very well on our own right now. Of course, we examine possible takeovers, but we evaluate them very stringently to see if they’re worthwhile.
Do you currently have any interesting takeover targets?
We all look at what’s out there. But like I said, not every target makes sense.
You said you’d like to make the bank simpler. So why don’t you buy the remainder of Comdirect, your direct banking subsidiary, where you currently own 82 percent?
As long as Commerzbank and Comdirect are successful, there’s no reason for me to question that arrangement.
Consolidation is not a cure-all. You can also grow organically.
How will Commerzbank react to Brexit? Will you act like other banks, and pull employees out of London?
Of course, we have a very large subsidiary in Britain, and London will remain important for us in the future. But even before Brexit we moved trading and back office capacity to the Continent, especially to Frankfurt. So, unlike other institutions, we’re not under pressure to make decisions at a time of great uncertainty. We can quietly wait things out, and see what actual agreements are ultimately made.
So you’re not planning any relocations?
We are prepared and flexible. For any further decisions, there has to be clarity on the future relations between Britain and the EU.
Is that also the case for euro clearing, in other words securities settlement?
Yes. We’ve used London for euro clearing since 2000, but we’re also a customer of Eurex, the Frankfurt-based securities settlement exchange. Right now we’re waiting to see how the political decisions turn out. If there is a relocation, I think it would make sense to use Eurex.
Cerberus, the financial investor, recently acquired a five-percent stake in Commerzbank. How is this seen in the bank? As a danger or a shot in the arm?
It is a good custom for management not to comment on its shareholders, and I’ll stick to that.
Cerberus is well-known for forcing through tough reconstructions on companies, for example the Austrian bank Bawag. Will this mean that Commerzbank will have to intensify its spending cuts even more?
I don’t understand the connection you’re making. But I’ve told you what we’re doing. We don’t only want to grow, we want to fundamentally change the bank’s work processes. Our cost reductions and job cuts have been very extensive.