FRANKFURT – Germany’s Commerzbank said Tuesday it lost 94 million euros ($123 million) in the first quarter after taking heavy charges for future job reductions as the bank tries to turn its business around.
The net loss compared to a profit of 355 million euros in the same quarter a year ago.
Germany’s No. 2 lender behind Deutsche Bank took 493 million euros in reductions to earnings for restructuring that will include 4,000 to 6,000 job cuts by 2016. The bank announced the cuts in January and warned in April that it would take a large restructuring charge.
Commerzbank has been on a long road to recovery since it was bailed out in 2009 by the German government, which still owns 25 per cent. The job cuts stem from a program launched in November to invest in the lender’s core business while also reducing personnel costs. The bank made only 6 million euros in profit for last year due to large writedowns, a performance CEO Martin Blessing said was not satisfactory. The bank is raising 2.5 billion euros by issuing new shares through a capital increase approved at the April 19 shareholders’ meeting.
The bank said Tuesday that currently low interest rates also hurt earnings as interest income fell by 338 million euros, to 1.356 billion from 1.694 billion euros. It saw more income from trading securities and made an operating profit excluding the restructuring charges of 469 million euros, although that was down 19 per cent from the figure for the year-ago quarter.
Profit for the rest of this year would be “shaped by ongoing pressure on revenues,” the banks said in a statement.
Overall, the bank’s income before loan losses fell 4.6 per cent to 2.46 billion euros.
The bank said it was making “excellent progress” in disposing of investments that it no longer considers part of its core business such as commercial real estate and shipping loans. Non-core assets were reduced by 7.3 billion euros during the quarter to 143 billion euros.
“We were able to increase our operating profit in the first quarter despite a very challenging environment with extremely low interest rates, and have made further considerable progress in the consistent reduction of our non-strategic activities,” CEO Blessing said in a statement. He said the company’s focus this year was on implementing its turnaround strategy and that “the positive effects from this should increasingly become visible from the coming year onwards.”