Morning Briefing

Commerzbank in Hades

Commerzbank CEO Martin Zielke has landed a coup: US hedge fund Cerberus Capital Management agreed yesterday to take a 5-percent stake in the troubled bank, as it shifts its focus to retail business. The money from America is a sign of trust. Now the new strategy just needs to succeed. If not, Cerberus, which takes its name from the three-headed hound guarding Hades in Greek mythology and is known more for its bite than its bark, may sink its teeth into Germany’s second-largest bank.

Another troubled German lender, Deutsche Bank, surprised analysts and shareholders today with a sharp rise in second-quarter net profit to €466 million, thanks partly to lower legal costs. But CEO John Cryan said the group’s profitability still fell short of its longer-term goals and warned that legal costs could be higher in the second half of the year. Cryan must still be crying, privately, for the misdeeds of his predecessors.

German employers worry whether the country can continue to afford its welfare system following years of benefit increases. And for good reason: A government report warns that without cutbacks, social contributions will increase from around 40 percent of wages (split equally between employee and employer) to 48.8 percent by 2040 because of an ageing population and more welfare recipients. If the Christian Democrats and Social Democrats deliver on their campaign promises of spending even more, that rate could climb to 55.5 percent. The ruling coalition partners need to remember that money doesn’t rain down from heaven – it has to be earned on planet Earth.

At special meetings yesterday, the supervisory boards of Volkswagen and Daimler quizzed management about why they had learned about cartel allegations from the news media instead of their own executives. Both meetings yielded more questions than answers. VW chief Matthias Müller and his counterpart at Daimler, Dieter Zetsche, can expect to be bombarded with even nastier queries in the future. But this isn’t necessarily a bad thing. Maybe now they’ll deliver on their promised cultural change.

Talk about impressive growth: Facebook has topped 2 billion users, just five years after hitting 1 billion, and earned $3.9 billion in the second quarter, up 71 percent compared to the same period last year. Many German blue chips don’t make that much dough in an entire year.

Picture of the Day

The Russian nuclear submarine "Dmitry Donskoy" arrived at a naval base near Saint Petersburg yesterday, ahead of Russia's Naval Military Parade. Source: Reuters
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