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October 16, 2001

Commerzbank adopts leaner structure to restore earnings power

Commerzbank is responding to disappointing earnings performance in recent months as a result of sluggish economic activity and the weakness of the stock market with an extensive restructuring and cost-cutting offensive. Its goal, said the bank's chairman, Klaus-Peter Müller, at a press conference in Frankfurt am Main, is to reduce next year's operating expenses to roughly their level in 2000, i.e. to around EUR 5.5bn. Early in June, the overly strong rise in costs prompted the board of managing directors to apply the brakes; by means of various measures, including a recruitment freeze, they imposed savings of about EUR 240m for the current year.

Lower non-personnel costs...

The cost-cutting offensive will lead to substantial reductions in both personnel and other operating costs. The scaling-down of IT projects will lower spending by EUR 110m next year; a further EUR 100m relates to cuts in the communications budget. Another EUR 150m will be saved by pruning consulting costs and other expenditure.

...and shedding of 3,400 jobs

By 2003, it is planned to shed 3,400 jobs, representing about 8.5% of the present workforce of around 40,000 people. Mr. Müller stressed that apart from utilizing the normal staff turnover rate of 6% in past years for such a reduction, socially acceptable solutions are to be found, including stronger recourse to all the already practised models, such as part-time working for older staff and early retirement. However, for the first time in its history, the bank will not be able to avoid dismissing staff.

The lion's share of staff reductions will be borne by the retail banking department. In the branch network alone, over 1,100 jobs are to be shed. But at head-office departments as well, in transaction banking and in asset management, there will be substantial cuts, Mr. Müller announced. In this way, Commerzbank is adjusting its capacities to reflect the much lower demand for banking services. The measures are designed, he said, to enable the bank to present much improved figures as early as next year and to get both its cost/income ratio and return on equity back on the right course again.

Modern structures for the future

To accompany the cost-cutting offensive, the management board has approved a series of organizational and strategic restructuring measures based on the medium-term CB 21 project. They will ensure that the bank is focused, integrated and forward-looking. These primarily entail the establishment of clear-cut divisions in Germany and Europe above all in corporate banking, and also - for the first time in the bank's history - the appointment of four regional managing directors for Germany and two for Europe. Above all, they are intended to help the bank integrate its corporate and investment-banking operations. In retail banking, Commerzbank will similarly have two regional managing directors in future.

"Ideas to the fore"

In his remarks on strategy, Mr. Müller said that having terminated its talks with the Italian bank UniCredito, Commerzbank is now fully concentrating on implementing the CB 21 project and the cost-cutting offensive. Until these tasks have been performed and both the cost/income ratio and profitability have returned to solid levels, Commerzbank will not initiate any merger talks with other banks. He is convinced that by removing the ballast, adopting a clear business focus and modern organizational structures, and with resolute leadership, Commerzbank will overcome its present difficulties.

In order to lend force and tangibility to the new statements on its strategy, Commerzbank has also repositioned its communications activities in recent months. The previous slogan "The bank at your side" is being replaced by "Ideas to the fore", symbolizing Commerzbank's active approach, dynamism, progress and creativity.

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