"It's Not About Witchcraft"

In an interview with WirtschaftsWoche, CEO Bettina Orlopp discusses the atmosphere within the company, the government's share sale, and her own career path.

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Horst von Buttlar and Lukas Zdrzalek

WirtschaftsWoche, 18.10.2024

Bettina Orlopp
Bettina Orlopp© Commerzbank

Ms. Orlopp, you are the first woman to head a major German bank: has equality finally arrived in the banking sector?
In the financial industry, half of all employees have been women for years. So I'm pleased that this is reflected in our board as well: three out of six members are currently women. Although we do not yet have parity at the management levels below the board, we are working on it.

You worked at McKinsey for 20 years, moved to Commerzbank 10 years ago, and climbed from strategy head to CEO. For many, you are a role model. Do you often get the question: How did you do it?
Yes, that was already the case at McKinsey. I became a partner early on. And I was the only partner for years who worked part-time with children. That brings a lot of questions about how you manage it.

And how did you manage it?
Above all, you have to be relaxed.

Hopefully, that helps you these days.
It’s crucial in general if you want to manage the constant balancing act of career, business travel, family, and children. You need to be well-organized and have a partner with whom you can share everything. You can’t do it alone. Most importantly, you can only withstand the pressure if you enjoy your work. Pushing through is possible for short periods, but not in the long term - you won’t be successful, or you’ll get sick.

Is it fun to fend off a takeover?
(laughs) There’s certainly a lot on my plate right now, especially in my dual role as CEO and CFO. I have to tackle three issues: executing our 2027 strategy faster and with more ambitious goals; thinking about what comes after 2027; and dealing with the situation with the new major shareholder, UniCredit, which is naturally making customers and employees uneasy. We need to be prepared to evaluate an offer from UniCredit quickly if they make one. Despite all this, I enjoy my job a lot: I take pleasure in developing Commerzbank further.

The bitter irony could be that, as the first woman at the helm of a major German bank, you might set a record: the shortest tenure.
Well, you know, when I joined the board in 2016, many said: How long will she last? I was in charge of compliance, HR, and legal just when the US financial regulator imposed a $1.45 billion fine for a sanctions violation. The compliance organization was barely established back then, so I had to build a team and structures from scratch. And we succeeded. That’s why I’m calm today. And I need to bring this calm to the bank now so that the employees don’t freeze up and think: Oh God, what’s happening?

Have you managed that, or are the employees resigned to their fate?
I sense a clear determination to move forward.

On what do you base that?
Whether in conversations in the cafeteria or at a recent management meeting, there’s a strong will to advance the bank. Sure, there are worries - we’re bombarded with headlines.

Many are afraid for their jobs.
Fear doesn’t help in such a situation.

What specific measures are you taking to alleviate employees’ fears?
My main message is: We have to deliver. We’re not stopping any projects or the development of new products. We must continue our work, as simple as that sounds. Our customers need us. We have to stay out there!

When the government announced six weeks ago that it was selling parts of its Commerzbank shares, you were attending an evening reception at the state bank KfW. Attendees report that you suddenly picked up your phone when the news made the rounds. Would you still describe your relationship with the government as one of trust?
No question, the timing was unfortunate, and I received the information right at the reception. But I wasn’t legally allowed to know about the sales announcement beforehand. And: I was only surprised by the timing, not by the fact itself. We had hoped the government would reduce its stake.

A week later, UniCredit publicly announced that it had bought the government’s shares. What was your first thought?
I was very surprised. But for such a situation, there’s a clear action plan in place: We assembled a team and started working through it.

The government accidentally sold its “Coba” shares to UniCredit: How amateurish did you find the approach of the financial agency orchestrating the sale?
I understand that this question is interesting for you, but it doesn’t concern me. It happened as it did, and the responsible parties must ask themselves whether it was intended that way.

It can hardly have been intended.
The reduction of the stakes was intended, and the government has since announced that it will not sell any further shares for the time being. Everyone can draw their own conclusions from that.

In Berlin, after the initial wave of excitement, things have quieted down. They’re acting like rabbits, sitting still.
Nothing else has happened - the government is waiting and not selling new shares.

The chancellor initially called the takeover an “unfriendly act,” but we’ve heard little from Berlin since then. Do you miss further support?
No. Currently, there’s nothing on the table to evaluate - only UniCredit’s approach has been assessed so far.

Your message is: Commerzbank is indispensable as an independent bank for the German market. Which of UniCredit’s arguments do you find most compelling?
(laughs) That’s an interesting way to reverse the question! First, I want to emphasize that as a board, we are obligated to objectively assess any potential offer from UniCredit in the interest of all shareholders. And we will do so if an offer ever does come.

You slightly dodged the question.
Yes, your perception is correct.

The Italians argue that Commerzbank would be more profitable and stronger under their leadership. What do you say to that?
In recent years, we’ve demonstrated that we can significantly improve our profitability independently. Our return on equity was 3% in 2018 and nearly 8% in 2023. At the same time, we must consider the potential consequences of a takeover.

You’ve warned that the supply of loans to SMEs could be jeopardized. But Commerzbank, UniCredit’s German subsidiary HypoVereinsbank, and Deutsche Bank collectively have less than a 12% market share in corporate lending. Are you not that relevant?
This figure is misleading because it’s not granular enough. We are particularly strong with medium-sized companies, which are the core of the SME sector. If the supply of loans to these companies decreases, the cost of these loans increases, leading to higher interest rates. Additionally, we are significant in certain areas of corporate banking: We have a 30% market share in financing German foreign trade.

Why wouldn’t that continue under UniCredit ownership?
Many companies are both our customers and HypoVereinsbank’s. With a merger, they might shift business to avoid being too dependent on the new entity. Moreover, particularly in crises, it matters where the decision is made whether a company gets a loan. It can be crucial whether the decision is made in Frankfurt or Milan. For credit decisions, how well a bank knows a company is essential.

Your customers haven’t raised alarms yet: So far, only two companies - travel group TUI and real estate service provider Wisag - have spoken out against a merger.
That’s just the tip of the iceberg. I receive a lot of feedback from customers who want Commerzbank to remain independent.

So far, you’ve emphasized the risks of a takeover. Are there also positive reasons for your independence?
Our core focus is our 2027 strategy, which we recently refined: It’s attractive for customers, employees, and shareholders. We will distribute higher profits to them than in previous years and continue to improve earnings.

Analysts believe you’ll increase your revenues by over 15% by 2027.
Yes. And we want to achieve a return on equity of over 12% and spend no more than 54 cents to make one euro. Today, we’re at 61 cents. Our success so far gives us the confidence that we can achieve even more in the future.

You’ve recently benefited from rising interest rates. But ECB rates will fall again. Where will future growth come from?
There are always levers and ways to use capital more effectively and efficiently. The topic of artificial intelligence will also help us further. And we can grow inorganically through acquisitions. We plan annual investments of around 530 million euros, more than half of which will go directly into the customer business.

More efficiency plus AI, a few acquisitions - this is what you counter the Italian’s aggressive plan with?
It sounds simple, but fundamentally it’s about improvements in the core business, not magic.

What acquisitions can you imagine?
For example, in asset management. We’ve been expanding this area for some time and have already acquired several smaller firms. We focus on offering our customers new services. The advantage is that we don’t have to painstakingly integrate these companies into our IT systems. At the same time, we’ll look for acquisitions in corporate banking. But acquisitions are not the only way we can grow.

Such as?
We will significantly increase our commission income, particularly by consistently expanding our investment management and wealth management areas.

Many German banks have failed at this for years...
But we have a base of 11 million private and business customers. This offers us a range of opportunities to increase our commission income - not only in managing small and large assets. We are also confident we can do more business in payments with our corporate clients. Moreover, I see potential with our online banking subsidiary Comdirect.

Really? Comdirect seems to have stalled, with fintechs like Trade Republic setting the pace - both technologically and in terms of costs.
Yes, but my confidence is growing here too. On the one hand, we are increasingly succeeding in generating more profit from existing customers. On the other hand, our customer numbers have been rising again since this year. In the first half of the year alone, Comdirect acquired around 100,000 new customers.

You mentioned earlier that you are already thinking about how to develop Commerzbank beyond 2027. Why the hurry?
Not least because investors want to know what we can achieve as an independent institution by the end of the decade. Both options - a UniCredit takeover and an independent Commerzbank - have to be comparable for shareholders.

For years, many Germans have looked down on banks in Southern Europe. Now we find: Our institutions are not the drivers of European consolidation but the more profitable Southern European banks. What did the others do right, and what did our institutions do wrong?
Competition is particularly high in Germany because our banking system consists of three pillars: private banks like Commerzbank, savings banks, and cooperative institutions. This depresses profitability. This system does not exist in this form in other European countries because, unlike here, mergers between the pillars have been allowed.

So, are we still “overbanked” in Germany; do we have too many banks?
In principle, yes.

Would a merger between your bank and UniCredit therefore not make sense?
We’ve never been categorically opposed to mergers. The question is which mergers are the right ones at what time with what value proposition.

Economists see this as a way to advance European banking union and intertwine the continent more closely.
A merger now would mean taking the second step before the first. In Europe, we first need to finalize the legal prerequisites for a banking union before we consider European mergers. For example, banks can currently only use savers' deposits from one country to grant loans there. The banking union would only be beneficial if banks could use funds across borders.

Turning to the German economy: As a bank, you are also a seismograph. What are you hearing from your corporate clients?
The feedback is mixed and resembles the picture painted by economic indicators: On one day, we are surprised by positive news, such as high order intake at local companies, and the next day, bad news follows. The same goes for insolvency figures: They are higher than before the pandemic, but back then, they were still well below the levels of previous years. Overall, we don’t see structural problems in our economy: It’s not that entire industries are slipping.

That doesn’t apply to the automotive sector…
The automotive industry is certainly in focus due to its significant economic relevance. That’s why it dominates the headlines. But when we look at the insolvencies and difficult cases, there’s no discernible pattern. Often, it’s individual problems of specific companies.

So, are we being too negative about the country, as the chancellor claims?
We’re in a difficult situation, experiencing the second year of recession. Many companies are investing, but often not in Germany anymore. For us as a bank, this is not a short-term problem because we accompany companies abroad, but it is for the location. That’s why we urgently need reforms.

What gives you hope that the country will overcome this situation?
Sometimes, you encounter difficulties in life and wonder: Oh God, how do I get out of this? For Germany, that’s not the case: We know how to tackle our growth problem, for example, by reducing bureaucracy. We just need to get to it!

The interview was published with the kind permission of WirtschaftsWoche.