World News | Commerzbank Shares Jump After CEO, Board Chair Quit
Get latest articles and stories on World at LatestLY. Shares in Germany's struggling Commerzbank rose more than 8% on Monday in the wake of the resignation of the bank's CEO and board chairman under pressure over the bank's sagging profits and stock price.
Frankfurt, Jul 6 (AP) Shares in Germany's struggling Commerzbank rose more than 8% on Monday in the wake of the resignation of the bank's CEO and board chairman under pressure over the bank's sagging profits and stock price.
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CEO Martin Zielke and board chair Stefan Schmittmann submitted their resignations on Friday.
Zielke said that the bank's financial performance had been “unsatisfactory” and that the bank needed “a profound transformation and a new CEO.” Shares rose to 4.45 euros in early afternoon trading in Europe.
Media reports indicate the bank's management has been criticized by US private equity firm Cerberus Capital Management, the second-largest shareholder, over the pace of restructuring.
The bank is reportedly considering dropping 7,000 jobs and closing branches as it struggles with low profitability.
Discussions last year about a possible merger with Germany's Deutsche Bank did not lead to a deal. Commerzbank made a net loss of 295 million euros ($320 million) in the first three months of the year.
Very low or negative interest rates are one factor that can weaken profits, since they lower returns on bond holdings and squeeze margins on lending.
However the European Central Bank has taken steps to ease the impact of negative rates on bank profits by exempting some of their holdings at the central bank from the official negative rate.
Job cuts “will be just the start for the bank,” wrote ABN AMRO analyst Tom Kinmonth.
“Commerzbank is caught in a trap. Negative interest rates are hurting banks with low domestic government bond yields.” Commerzbank's largest shareholder is the German government with more than 15%, a legacy of a state bailout of the bank during the global financial crisis in 2009.(AP)
(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)