Banks facing huge challenges, says Commerzbank boss

Frankfurt is home to some of Europe’s biggest banks, many of which are facing tough choices amid an economic slowdown. (AP)
Updated 28 September 2019

Banks facing huge challenges, says Commerzbank boss

  • German lender to cut thousands of staff and close a fifth of branches

FRANKFURT: The challenges facing banks are “enormous,” Commerzbank Chief Executive Martin Zielke said on Friday, after the German lender said that it no longer expected a rise in underlying revenues this year.

The warning, announced late on Thursday, came as the bank’s supervisory board approved plans announced last week to cut thousands of staff and close a fifth of branches following a failed merger with bigger rival Deutsche Bank.

Commerzbank, part owned by the German government after a bailout, has been struggling for years with a legacy of bad debts, high costs and fines, and tough trading conditions have hampered its recovery efforts.

“Negative interest rates, increasing regulation, a weaker economy and tough competition ... The challenges facing banks are enormous,” Zielke said.

Outgoing finance chief Stephan Engels added the latest loosening of policy by the European Central Bank “will not make our lives easier,” and that a program designed to cushion the blow for banks would not fully compensate.

The bank said on Thursday that board member Bettina Orlopp would succeed Engels as chief financial officer, while Sabine Schmittroth would become board member for human resources.

“Over the course of 2019, the market environment has continued to deteriorate further. This has been particularly evident in the corporate clients business,” it said, explaining the downgrade in its revenue expectations.

The supervisory board also approved plans to sell a stake in the bank’s Polish subsidiary mBank and absorb its Comdirect online brokerage unit.

HIGHLIGHTS

● No longer expects revenue rise.

● Legacy of bad debts.

● Bank announces new CFO.

The lender flagged the strategic overhaul last week.

The measures were approved by the board during a two-day meeting. Among the plans, the bank will cut 4,300 jobs in some places but add 2,000 jobs in “strategic areas,” so the group headcount will fall in total by about 2,300 full-time positions, equivalent to about 5.7 percent of its workforce.

The mBank sale will further reduce staff levels. Headcount will fall to 29,300, a spokesman said. The company now employs about 40,700 people.

Commerzbank said the strategy would involve investment of (€1.6 billion) $1.8 billion, with €750 million going into new technology and the rest earmarked for restructuring.

The restructuring plan is negative for the German lender’s credit rating, ratings agency Moody’s has said.


Creditors take action against Al Jaber in decade-long saga

Updated 23 September 2020

Creditors take action against Al Jaber in decade-long saga

  • The downturn in the Gulf construction sector has triggered a number of corporate restructurings as companies are forced to reschedule debt, raise fresh borrowing or enter insolvency protection

DUBAI: Creditors have started to enforce claims against Abu Dhabi-based Al Jaber Group, in a dispute triggered by a construction downturn in the UAE more than a decade ago.

Al Jaber, a contractor with interests across a range of sectors, has struggled since building up debt in the wake of a UAE real estate crisis and began talks with creditors in 2011.

Abu Dhabi Commercial Bank, which is working as restructuring and security agent, said in a document dated Sept. 21 which was seen by Reuters, that it had instructions from the majority of creditors to proceed with claims against Al Jaber.

A representative for Al Jaber did not immediately respond to a request or comment. ADCB declined to comment.

The move follows delays in restructuring agreements, under which Al Jaber was to appoint a new board and sell companies and assets such as the Shangri-La hotels in Dubai and Abu Dhabi.

In exchange, creditors had agreed to extend the maturity of a 5.9 billion dirhams ($1.61 billion) loan, cut interest rates, and provide additional revolving debt.

The initial enforcement action now being pursued by creditors includes the “acceleration and demand for payment of amounts outstanding” under the previously agreed debt restructuring, a source familiar with the matter said.

Enforcement will also allow creditors to claim against Al Jaber’s chairman under a 4.5 billion dirham loan to the company.

Several UAE companies have sought to extend debt maturities or agree better terms in recent years to avoid defaults, after an oil price crash hit energy services and construction.

The coronavirus crisis has added to the strain and Arabtec Holding, the UAE’s biggest listed contractor, this week will discuss options including dissolution after the pandemic hit projects and led to additional costs.

Meanwhile, Dubai-listed construction firm Drake & Scull is working to reach an agreement with its creditors in an out-of-court process.