Commerzbank AG (ADR) (PINK:CRZBY) revealed today, its plans to axe up to 6,000 jobs to improve earnings. The bank said it may cut about 4,000 to 6,000 jobs by 2016, representing 7-10 percent of its total workforce. As of September 30, 2012, Commerzbank's total workforce stood at 56,287.
The job cuts will be from its global operations, mainly from its retail division which has been expanded rapidly in recent years, said a person familiar with the matter.
The job-cuts have landed the bank in the elite club of European banks that have announced restructuring plans in recent months. Tougher capital requirements, sluggish economic growth and growing concerns about risky trading activity have forced several European banks to slash their work forces, get rid of unwanted assets and increase capital reserves.
The Swiss financial giant, UBS AG (NYSE:UBS), in October, announced plans to eliminate 10,000 jobs from its investment banking division to increase the focus on its wealth management division.
Another big name in the financial arena, Barclays PLC (LON:BARC) (NYSE:BCS), which will announce its restructuring plan in February, has started the process, this week, for potential layoffs in its investment banking unit. In Asia, the bank has started to cut the size of its investment banking staff by 15 percent, or 70 jobs.
The work-force reduction at the second-largest lender in Germany follows the efforts of chief executive, Martin Blessing, to off-load about 160 billion euros ($213 billion) of firm’s noncore assets, including shipping and real estate investments. Due to continued volatility in countries like Spain and Greece, the bank is also making efforts to reduce its exposure to European sovereign debt.
In 2008, the German bank received an 18.2 billion euro bailout from the government, in return for a 24 percent stake in Commerzbank. At that time, Commerzbank mishandled an acquisition of a rival German bank, Dresdner, for 5.5 billion euros.
On Thursday, shares of Commerzbank AG (ADR) (PINK:CRZBY) were up marginally (less than 1 percent) in morning trading session, in Frankfurt.
“We believe that UBS AG (NYSE:UBS) has kicked off the much-awaited industry restructuring, even if each bank takes a different path,” Citigroup Inc. (NYSE:C) banking analysts told investors in a research note.
Many of the European financial institutions will be coming up with their earnings report-card next week. Analyst will be eagerly watching if they would also, like UBS, announce major changes in response to uncertain financial environment.