Commerzbank CEO to forgo bonus due to poor profits
- Article by: DAVID McHUGH
- Associated Press
- February 15, 2013 - 11:06 AM
FRANKFURT, Germany - The head of Germany's Commerzbank says he's not asking for a bonus after a year of meager profits and no dividend for shareholders.
The bank is cutting costs and plans to drop 4,000 to 6,000 jobs through 2016. CEO Martin Blessing also gave a downbeat outlook for 2013, saying it would be a year of restructuring that would cost "effort, money and time."
He said Friday that revenues, measured before provisioning for loan losses, "will remain under pressure" for this year.
Blessing termed profit of only (EURO)6 million ($8 million) for last year as "unsatisfactory" and told the board of directors he would not be drawing any performance-related pay. He said other executives on the top management committee would still get 40 percent of their bonuses, while managers lower down would take home more. He cited a "responsibility pyramid" in saying those with more authority should make a bigger sacrifice.
"I am at the top, and find that a larger contribution is correct and justified," he said. His base pay for 2012 was (EURO)1.3 million ($1.7 million).
The bank is restructuring to deal with tough conditions for the banking industry, including low interest rates and regulators' demands that banks keep stronger financial buffers against losses. It is winding down troubled businesses in ship financing and commercial real estate, as ordered by European Union authorities, to compensate for the state aid it got when it was bailed out after the 2007-2008 financial crisis. The German government still owns 25 percent.
The bank provided detail Friday on its fourth-quarter earnings announced Feb. 4. It lost (EURO)716 million ($954 million) largely due to one-time losses of (EURO)185 million on its sale of Bank Forum in Ukraine and (EURO)560 million in tax accounting charges.
For all of 2012, net profit was a meager (EURO)6 million. Contributing to the poor result were the large one-time charges for Bank Forum and the tax issue, as well as losses on shipping finance loans that are not being repaid due to troubles in that industry. Additionally, rock-bottom interest rates set by the European Central Bank and other central banks narrow the difference between what the bank pays depositors and creditors for money and what it can earn on loans.
The bank says its job cuts will see it incur costs of (EURO)500 million for restructuring in the first quarter of this year alone. It says it is ahead of schedule in reducing expenses, however. The bank's shares closed up 1.2 percent at (EURO)1.49.
Some of the bank's businesses, particularly its core business lending to mid-size companies in Germany, are doing better. The German business finance division showed very low loan losses of only (EURO)30 million for the whole year due to the country's relatively strong, export-based economy and raised operating profit to (EURO)1.65 billion from (EURO)1.59 billion.
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