€610 million ($745 million) is being set aside by Commerzbank AG in the fourth quarter to pay for one-off costs related to planned layoffs, as part of Germany’s second-biggest bank’s efforts to reduce costs.
According to a Bloomberg report, Commerzbank AG will pay this amount as the lender is gearing up to cut up 2,300 positions between 2021 and 2024. Although formal numbers have yet to be announced under a strategic overhaul, the German lender is joining a growing list of global banks that have announced multiple job reduction rounds this year.
Commerzbank has been pursuing deeper cost cuts and will present a new plan with the release of its first-quarter financial results. The move comes amid growing pressure on the group’s revenues and the negative effects of the coronavirus pandemic.
The bank’s new CEO, Manfred Knof is set to discuss the possibility of a further 7,000 layoffs when he takes office in January, which is in addition to nearly 4,000 job cuts announced last autumn.
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Investors Want More Job Cuts
Additionally, the bank has been shuffling around major executives over the last few months. A number of key executives have exited the bank, including CEO Martin Zielke and Chairman Stefan Schmittmann. Both resigned suddenly in July, and their departure was followed by a major shift in the lender’s restructuring plan.
The original plan, dubbed ‘Commerzbank 5.0,’ was unveiled last year and involved the reduction of 4,300 positions and the closure of about 200 branches in Germany. However, major shareholders criticized Commerzbank’s management for not making deeper cost cuts and also demeaned the bank to pull out of businesses where it is not profitable, especially after the collapse of merger talks with Deutsche Bank.
As a result, Commerzbank board is now considering to increase branch closures to 400 and job cuts to 10,000, or double the numbers previously mentioned.
Furthermore, Commerzbank decided not to sell its Polish subsidiary mBank, and will instead retain its majority stake of 70% in the lucrative business and terminate the sales process.