Commerzbank draws weapons and between ambitious targets, thousands of staff cuts and generous dividends, everything is at stake resist the assault of Unicredit, which has owned since December a 28% stake in Germany's second largest bank and is waiting for the ECB and the German elections on February 23 to decide what to do in the future. “Germany needs strong banks and Commerzbank is stronger today than it has ever been”, declared CEO Bettina Orlopp, opening the press conference to present the 2024 accounts and the update of the strategic plan. Words aimed at convincing investors that Commerz is able to do it alone, to remain independent and still create value despite the difficulties of recent years. A position that however does not seem to have completely convinced the market, with Commerzbank title which has been going through a continuous up and down since this morning in Frankfurt.
Commerzbank to Cut 3.900 Jobs by 2028
For months, Commerzbank management has been working on a strategy update that Orlopp says will show the bank's "significant value potential." And among the cornerstones of this new strategy is cutting 3.900 jobs by 2028, of which approximately 3.300 relate to central functions and activities in Germany, the institute announced by updating its strategic plan which focuses on increasing efficiency through digitalisation.
The reduction in staff will be accompanied from hiring outside the country. This means that “the number of employees of the group” will remain “constant to 36.700 globally,” Commerzbank said. To implement the cuts, in 2025 alone, it is planned 700 million euros of restructuring costs.
Target: 4,2 billion in profits in 2028
And now we come to the targets. The German bank foresees a Net income of 2,8 billion in 2025, gross of restructuring costs, and 2,4 billion net. “This provides us with a solid foundation for the years to come,” commented Bettina Orlopp. Commerzbank’s strategy update comes after the bank reported a 20 percent increase in net profit for the full year, which was better than expected, a result that for the bank underscores the success of its turnaround efforts in recent years.
Returning to the targets, the interest margin is expected to be between 7,7 and 7,9 billion, while commissions are expected to grow by around 7%. The cost/income ratio should stand at 57%, with a capital ratio Cet 1 at least 14% after the planned capital distribution.
The Frankfurt institute also raised its target for 2027 and now targets net profit of 3,8 billion euros in 2027, compared to the previous 3,6 billion, and a cost/income ratio of 53% in 2027, compared to the previous target of 54%. The return on tangible capital will then rise to 15% by 2028, year in which the net profit should reach 4,2 billion. Revenues are expected to grow by an average annual 4% to 14,2 billion, driven by net commissions against an interest margin in “moderate increase”. The cost/income ratio will fall to around 50%. The Cet 1 in 2028 “will therefore approach the target level of 13,5%”, Commerz forecasts.
Commerzbank: Dividends and buybacks aplenty, 100% payout
The remuneration for members who will receive it will increase 1,73 billion euros, 71% of the net result after deduction of AT 1 coupons, to its shareholders for the 2024 financial year. Part of the capital return is the bank's third share buyback program. In January 2025, Commerzbank completed the buyback of the first tranche of 600 million and has already received approval from the authorities to proceed with a second tranche of up to 400 million.
At the same time, the board of directors will propose to the shareholders' meeting scheduled for next May 15th a dividend of 0,65 euros per share, up from 0,35 last year. Overall, the bank will return to its shareholders approximately 3,1 billion euros for the years 2022 to 2024, or more than initially announced.
From 2026 to 2028, Commerzbank is then aiming for a 100% payout after the payment of the At 1 “provided that the strategy is successfully implemented” and if macroeconomic conditions allow it.
“Commerzbank has what it takes to increase shareholder returns in the years to come – said the designated CFO, Carsten Schmitt – Continuously increasing revenues, strict cost discipline and a dynamic return on capital provide the basis for a reliable increase in the bank's profitability".
CEO Orlopp: “Unicredit should tell us what it wants, we are ready to evaluate proposals”
During the press conference to present the strategy, Orlopp explained the reason why he doesn't want to meet the number one of Unicredit Andrea Orcel: “It seems to me that train has already left,” he said. “You can only have informal meetings if the public is not carefully monitoring every step.” Today, the content of such a meeting “should probably be public,” he noted.
"We are willing to do so only once it is clear what the other party wants," he stressed. "I think it is a reasonable request." After all, Unicredit "bought a share of almost 30%" of Commerzbank, so "it should have at least a rough idea of what he wants to do”. Unicredit, Orloop further stated, “is an important shareholder of ours and we meet its representatives at investor meetings as we meet all the other shareholders”. Also because “there is a principle of equal treatment” among the shareholders and in addition “there must be particular attention because they are also competitors”. Orlopp however reiterated that he is “ready to evaluate a possible proposal”. “If there is a combination proposal” from UniCredit, “it will have to be carefully analyzed, evaluating the synergies but also the potential loss of customers,” continued the head of the German bank, stating however that “our customers, especially among small and medium-sized enterprises, prefer Commerzbank to be independent”.
Answering to those who asked her whether, in the event that the bank were to remain independent, it would be better for Unicredit to remain as a major shareholder or to sell its entire stake, the CEO of Commerz said: "It is not up to us to decide. Our hope is always to have stable investors who support us".
Orcel: “Joining Commerz will bring mutual benefits”
A partial answer to Orlopp's question ("what does Unicredit want to do") came this morning from Andrea Orcell who, in an interview with Sun 24 Hours, confirmed its interest in the German market, while stressing that the bank has never tried to force its hand.We entered the game after being invited, but we did not stop even when the position changed,” he explained, despite both Commerzbank and the German government having always branded the takeover as “hostile”. The entry into Commerzbank, according to the banker, could lead to mutual benefits, as the German institution has shown no signs of significant growth in recent years. “With Unicredit, Commerzbank would have greater critical mass to compete in the segments we target,” he said.
Commerzbank share price on the stock exchange
Meanwhile at the Frankfurt Stock Exchange, Commerzbank title is in the midst of a continuous ups and downs. The shares hit an intraday low of 18,76 euros per share and, after Orlopp's press conference, are up 1,5% at 19,19 euros per share, but analysts and investors do not seem entirely convinced by the targets presented in the plan update, considered "too ambitious", especially the one relating to the return on tangible capital of 15% by 2028. "Investors may be skeptical about the German bank's ability to achieve this goal, considering that the 50% cost-income ratio target depends on the 3.900 planned job cuts that will face strong opposition, while the difficult German macroeconomic environment will hinder revenue ambitions", warn analysts at Bloomberg Intelligence. “Furthermore, Commerzbank has forecast that its profit will fall to 2,4 billion this year as it spends 700 million on cost cuts.”
Since Unicredit's entry into the capital, the shares of Commerzbank gained more than 50% of their value. A remarkable performance that however, according to some analysts, could slow down if Unicredit were to give up its acquisition plans. Orlopp does not think so, according to whom the current stock market prices are "absolutely adequate for us even on Stand alone bases". "Our target is to reach a ratio between the stock price and the book value equal to one," he concluded.
