Commerzbank loses $123M in Q1 due to restructuring

May 07, 2013, 6:45 AM EDT
REUTERS/Lisi Niesner/File

FRANKFURT, Germany (AP) — Germany's Commerzbank said Tuesday it lost 94 million euros ($123 million) in the first quarter after taking heavy charges for future job reductions as the bank tries to turn its business around.

The net loss compared with a profit of 355 million euros in the same quarter a year ago.

Germany's No. 2 lender behind Deutsche Bank took charges worth 493 million euros for restructuring that will include 4,000 to 6,000 job cuts by 2016. The bank had around 54,000 employees at the end of the quarter. It announced the cuts in January and warned in April that it would take a large restructuring charge.

Commerzbank has been on a long road to recovery since it was bailed out in 2009 by the German government, which still owns a 25 percent stake. The job cuts stem from a program launched in November to invest in the lender's core business while also reducing personnel costs.

The bank made only 6 million euros in profit last year due to large writedowns, a performance CEO Martin Blessing said was not satisfactory. The bank is raising 2.5 billion euros by issuing new shares through a capital increase approved at the April 19 shareholders' meeting.

The bank said that currently low interest rates also hurt earnings as interest income fell to 1.36 billion euros from 1.69 billion euros. It saw more income from trading securities and made an operating profit excluding the restructuring charges of 469 million euros, although that was down 19 percent from the figure for the year-ago quarter.

Profit for the rest of this year would be "shaped by ongoing pressure on revenues," the bank said in a statement. Blessing said in a statement that while the bank's customers and markets were feeling less uncertain in general, "it is too soon to speak of an underlying trend reversal."

Overall, the bank's income before loan losses fell 4.6 percent to 2.46 billion euros.

The bank said it was making "excellent progress" in disposing of investments that it no longer considers part of its core business such as commercial real estate and shipping loans. Non-core assets were reduced by 7.3 billion euros during the quarter to 143 billion euros.

Commerzbank shares traded up 1.3 percent at 10.95 euros in midday trading in Europe.