By Elena Vardon
Commerzbank plans to lay off around 9% of its workforce in a bid to boost profitability and convince investors of its standalone prospects as it fends off an unwanted approach from Italy's UniCredit.
Germany's leading lender for small and medium-size companies outlined a fresh strategy to defend its independence as UniCredit's attempts to engineer a merger are slowed down by political opposition and pending elections.
The bank said Thursday that it is targeting a jump in its return on tangible equity by 2028 to 15%, ahead of a previous target of more than 12% for 2027 and 9.2% reported in 2024.
It guided for a net result of 4.2 billion euros ($4.36 billion) for 2028, by when it also aims to improve its cost-to-income ratio to around 50%. This compares with last year's net result of 2.68 billion euros and a cost to income ratio of 59%.
For 2025, Commerzbank expects a decline in its net result to 2.4 billion euros after restructuring charges, which it estimates will amount to 700 million euros.
The group plans to cut 3,900 jobs by the end of the plan with most of the reductions affecting central staff functions and operations in Germany. It employed 42,359 at the end of its third quarter, according to its website.
However, Commerzbank said its workforce will remain stable at around 36,700 as it plans hires in its international businesses.
"With this momentum, we are accelerating our profitable growth and consistently driving forward our transformation," Chief Executive Bettina Orlopp said. Previously the bank's finance chief, she took on the top job late last year, shortly after UniCredit had set its sights on Commerzbank to add to its existing German bank and extend into Poland.
UniCredit has built up a 28% stake in its peer mostly through derivatives, surpassing the German government as its largest shareholder. Chief Executive Andrea Orcel has said he is waiting until after Germany's federal elections later this month to reassess its options for the investment in Commerzbank and engage with the new government before making a move.
In terms of shareholder rewards, the bank targets a payout ratio to 100% of net result after AT1 coupon deductions for 2026 to 2028. The ratio will also be 100% for 2025 before restructuring charges which it sees amounting to 700 million euros this year.
This follows 1.73 billion euros in shareholder returns for 2024.
Write to Elena Vardon at elena.vardon@wsj.com
(END) Dow Jones Newswires
February 13, 2025 02:07 ET (07:07 GMT)
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