Commerzbank AG, the German bank that got 18.2 billion euros ($24 billion) in state aid, forecast a first-quarter loss on staff-reduction costs as executives faced disgruntled shareholders in Frankfurt.
“The first quarter of 2013 will be affected by one-off effects due to the planned job cuts,” Commerzbank said in a statement at its annual shareholders’ meeting in Germany’s financial capital. The lender said in March that the job cuts will cost 500 million euros in the first three months.
Commerzbank, which is eliminating staff and shutting down loss-making shipping and real estate units, is asking shareholders to approve a fifth capital increase in four years as it seeks to repay a remaining 1.6 billion euros in state aid. The bank, which had a loss of 716 million euros in the fourth quarter, hasn’t paid a dividend since the financial crisis erupted in 2008. Its shares have lost 93 percent since.
“We don’t trust this management,” Klaus Nieding, vice president of DSW, a proxy voting agent representing the interests of small investors in German firms, told executives including Chief Executive Officer Martin Blessing today. “And with all due respect, Mr. Blessing, we’re fed up.”
Commerzbank fell as much as 3.1 percent and declined 2.2 percent to 1.14 euros at the close of trading in Frankfurt. The shares have lost 20 percent this year, giving the company a market value of 6.7 billion euros.
Germany’s No. 2 bank may post a loss of 239 million euros in the first quarter, according to the median estimate of four analysts in a Bloomberg survey. Blessing didn’t give a forecast, saying projections for 2013 were “difficult” and that he “can understand the disappointment of shareholders.”
“The loss in the first quarter is not a big surprise,” said Stefan Bongardt, an analyst at Independent Research GmbH in Frankfurt, who recommends selling the shares. “I expect big portfolio sales during the remainder of the year to weigh on the bank’s profitability.”
Commerzbank, the biggest lender to Germany’s small and medium-sized businesses, said it plans to sell shares to increase capital between mid-May and the start of June. By repaying the state aid, it will save 200 million euros in annual interest payments, according to Blessing.
“From our shareholders’ point of view there are many reasons for repaying the silent participation as quickly as possible,” Blessing told the 4,400 shareholders. “We are enhancing our future ability to pay dividends.”
A group of about 20 investors protesting the bank’s policies gathered outside the meeting as Blessing arrived for his keynote speech. Some applauded as he announced the first-quarter loss and speakers called for Blessing and Chairman Klaus-Peter Mueller to resign.
“Mr. Blessing, how can you explain to me that my savings evaporated?” said Hans Peters, a shareholder with 3,000 shares whose value slumped to about 3,400 euros according to Bloomberg calculations based on the current share price from what he said was once worth 100,000 euros. “Ladies and gentlemen, I call on you not to give your approval to this chairman and CEO.”
Commerzbank plans to boost its performance by cutting 4,000 to 6,000 positions by 2016, including 1,800 at branches in Germany. The firm said it expects its core Tier 1 capital ratio, a key measure of financial strength, to be 9 percent at the end of next year.
The troubles at Commerzbank come as Germany’s economy recovers from the financial crisis and government bond yields hit record lows. After shrinking 5.1 percent in 2009, the deepest contraction since World War II, the economy grew 4.1 percent in 2010, 3.1 percent in 2011 and 0.9 percent last year.
Since the financial crisis erupted, losses for Commerzbank’s stock are almost double the 48 percent decline of the benchmark Bloomberg 500 European Bank Index. Royal Bank of Scotland Group Plc, rescued by the U.K. government, fell 88 percent in the period. Spain’s Bankia, which got a record European bailout, dropped 92 percent since July 2011.
“I have no hopes that it is going to get better with the bank,” Nieding said. “We expect that the new targets won’t be met either for 2016.”