Posted on 10/06/2002 6:43:22 PM PDT by DeaconBenjamin
Commerzbank, Germany's third biggest listed bank, is set to cut hundreds more corporate banking jobs after deciding to review its corporate activities.
The redundancies, the exact number of which has yet to be decided, will come on top of the 4,300 jobs Commerzbank said it would axe by the end of 2003. This already represents about 10 per cent of its workforce.
Most cuts are expected to take place in Germany, although some London employees will be affected.
Further job losses may also be triggered by the bank's plans to outsource some of its support systems - a move that the Commerzbank executive board is believed to have agreed last week.
News of Commerzbank's cost cuts comes just days after its share price fell following concerns that it had large losses from its loan portfolio.
On Friday, the Financial Times unearthed a seven-line email from Maria Anastase, of Merrill Lynch's corporate credit department, to credit rating group Standard & Poor's voicing concerns over the financial health of Commerzbank.
She wrote: "Again the market is flooded with rumours that Commerzbank, amongst all its other problems, has sustained large trading losses in credit derivatives".
Commerzbank said that while it may have grounds to take legal action against Merrill Lynch, it was not considering doing so.
Paul Roy, co-president of global markets and investment banking at Merrill Lynch, said the situation arose as part of regular daily contact between its internal credit department and one of the rating agencies.
"It was a one-on-one email and we're mystified as to how it has become public and as to why it has been blown out of proportion. In fact, we have had a satisfactory response from the rating agency and it is business as usual for us with Commerzbank, a valued customer of ours. Importantly, we have made no change in our credit policy for Commerzbank. This over-reaction is part and parcel of the nervous frame of mind of the market at the moment."
It is understood that Mehmet Dalman, chief executive of Commerzbank's investment bank, has held preliminary conversations with Merrill over potential joint ventures in Germany.
The bank has also started to review its lending policies and is expected to whittle down its portfolio to concentrate on a few clients which will increase value for shareholders.
Last week, Klaus-Peter Müller, Commerzbank's chief executive, said he could no longer give a forecast for full-year profit, earlier at €700m-€800m ($688m-$785m), and said he expected 2002 risk provisions of about €1.3bn, up from €1.1bn earlier.
This is big, big news in NY financial circles. Lots of rumors about Commerzbank being on the edge of total collapse, and possibly being the first domino to fall, instead of some financial sinkhole in South America. This story should be watched very carefully by Freepers.
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