BrazilCommerzbank to shed quarter of its 40,000 workforce
Having spent the earlier part of 2020 working with all three of the world’s largest strategy consultancies, Germany’s Commerzbank has announced plans to lay off more than a quarter of its total workforce. The financial giant also plans to slim its number of physical branches by nearly half.
Commerzbank focuses on retail banking and lending to mid-sized German companies, and is highly dependent on net interest income. In the 2019 financial year, the bank was the second largest in Germany by the total value of its balance sheet, however recent years have still seen it hit hard by the European Central Bank’s (ECB) policy of ultra-low interest rates. The bank’s declining profitability is reflected in its falling stock value; back in 2007, its shares traded at €250 per share, while recently this has often hovered around the €3 mark.
In a bid to revive its fortunes, the last few years have seen Commerzbank embark on several strategic reorientation programmes, as well as trying to seal a merger with fellow financial giant Deutsche Bank. In April 2019, the merger talks collapsed, with officials of Germany’s largest bank stating that the risks and costs were too great to continue. With Commerzbank’s fortunes seemingly locked into a downward spiral, the German Government – Commerzbank’s largest shareholder by far, owning a stake of 15% – called in consultants from Boston Consulting Group to review the bank’s business model.
According to reports from Bloomberg, BCG recommended a cost reduction up to three times larger than the target set by the Commerzbank’s Chief Executive Officer. Embattled CEO Martin Zielke had previously insisted the bank should maintain 800 of its approximate 1,000 branches, in order to achieve growth in Germany’s competitive retail market, despite extremely thin margins.
Zielke had also stated that 4,300 jobs would be axed – a figure which Stefan Wittmann, Verdi trade union secretary and member of Commerzbank’s supervisory board, had agreed on in principal. Speaking at the time the original cuts were announced, Verdi’s Wittman had told German newspaper Handelsblatt that he was not opposed to job cuts in administration. The issue was not “whether” but “how” to implement these cuts, he explained.
To this end, early 2020 saw the Chief Financial Officer of Commerzbank – former McKinsey partner Bettina Orlopp – announce that the bank had hired Bain & Company to identify an additional €500 million in savings, on top of an already existing plan to slash €1 billion from its cost base by 2023. This was followed by Zielke bringing in McKinsey & Company, as the bank sought to accelerate its costs savings.
McKinsey was tasked to oversee the development of a new corporate strategy, as well as a review of the firm’s organisational structure. The project was expected to run for three to four months.
That time has come and gone, and even after the intervention of all three of the MBB (the world’s largest strategy consultancies), Commerzbank does not seem to have been provided with any opportunities for ‘costs savings’ aside accelerating its decimation of its headcount and physical branches. Now, Handelsblatt has now reported that Commerzbank drew up new plans to close 450 of its 1,000 branches, and reduce its workforce of 40,000 by as much as 11,000.
With the shifting of these goals, the Verdi union claimed it was not privy to discussions on the larger-than-expected cuts, and sabotaged the bank’s supervisory meeting in protest. The bank now faces a potential standoff with its workforce representation over the round of layoffs.
Uwe Tschäge, Chairman of the general and company works council, told Handelsblatt that he would not stand in the way of job cuts as long as they were “socially acceptable,” but stated there must be no compulsory layoffs, adding, “We will fight for this.” Further demands included Commerzbank choosing an “appropriate period,” and making sufficient money available for part-time work for older employees, while Tschäge said he wanted to be able to understand why and where management was cutting jobs.
Further complicating the matter, Tschäge said he expected the federal government – which has been a major shareholder since bailing out Commerzbank amid the financial crisis of 2008 – to support him in ensuring that employees were “treated decently.” He added that the SPD (Germany’s centre-left Social Democratic Party), in particular, had to work toward this goal, as part of the nation’s ruling government coalition.
