FT: Commerzbank eyes mass layoffs amid pressure from Italian rival

The Germany-based banking institution, Commerzbank, is considering cutting thousands of jobs as part of a strategy to strengthen its position and fend off a potential takeover by Italy’s UniCredit. 

While the plans have not yet been finalized, sources familiar with the matter suggest that the layoffs could number in the "low thousands." The bank's workers' council is expected to be briefed on the proposals in the coming weeks, Caliber.Az reports via The Financial Times.

The German lender’s new CEO, Bettina Orlopp, is preparing to unveil an updated strategy on February 13, aimed at boosting profitability and shareholder payouts, which would allow Commerzbank to thrive independently. UniCredit, led by Andrea Orcel, has gradually increased its stake in Commerzbank, positioning itself to potentially become the bank's largest shareholder, pending regulatory approval. Orcel has openly expressed his ambition to acquire Commerzbank in its entirety.

While many investors view a merger favourably, the German government has expressed concerns due to its 12 per cent stake in the bank, which it has not fully sold. Union leaders and politicians have raised alarms about the prospect of significant job losses in Germany if UniCredit were to take control. Unions have warned that a merger could lead to the loss of up to 15,000 jobs, a scenario with heightened political sensitivity ahead of Germany's upcoming federal elections.

Despite the pressure from UniCredit, Commerzbank is also exploring ways to improve its financial performance on its own. The bank has already embarked on a significant restructuring process, which has included cutting thousands of jobs and reducing its branch network by approximately half since 2021. These moves have been credited with boosting operating profits and tripling the bank’s share price over the last three years. In 2023, Commerzbank also initiated its first-ever share buyback program.

However, even with the improvements, analysts note that Commerzbank’s cost structure remains higher than its rivals, including UniCredit’s German subsidiary, HypoVereinsbank (HVB). This has increased pressure on Commerzbank to prove that it can generate better profitability and shareholder value as an independent entity. Some insiders have raised doubts about the bank’s ability to do so, considering the potential for cost savings and synergies from a merger with UniCredit.

Orlopp is now looking to accelerate restructuring plans that were previously slated for the future. A major driver of these potential cuts could be the bank’s adoption of digitization and artificial intelligence, which may lead to some IT functions being outsourced or "nearshored" to other European countries outside of Germany.

Commerzbank has stated that its strategy update is still in development and that details will be shared alongside its full-year results next month. The final outcome of the restructuring and the bank's stance on UniCredit's takeover bid will depend on ongoing discussions within the management and supervisory boards.

By Khagan Isayev