Commerzbank Flags Fears of Euro Zone Collapse!
- Commerzbank flags fears of euro zone collapse!
by Arno Schuetze and Edward Taylor; Editing by Sophie Walker
(Reuters) – Germany’s second-largest bank Commerzbank (CBKG.DE) braced for a worsening of the euro zone crisis and gave a grim profit outlook on Thursday, warning it may not pay a dividend in 2013. The bank, which is 25 percent owned by the German state, said it would restructure its retail business and continue to clear out toxic assets in response to sliding profits.
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The bank’s second-quarter group net profit dropped to 275 million euros ($340 million), missing analysts’ forecasts of 388 million as retail and investment banking revenues slumped and provisions for bad shipping loans spiked. It warned that second-half profits would be lower still.
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“The greatest downside risk remains an uncertainty shock from an escalation of the sovereign debt crisis – i.e. the collapse of the monetary union,” Commerzbank said in its quarterly report, adding it thought that risk was higher now than in autumn last year.
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Against this background, Commerzbank expects the net profit in the second half of the year to be “significantly below” the net profit of the first six months, said Chief Financial Officer Stephan Engels, adding it was becoming tougher to pay a dividend for 2013. The bank has no plans to pay a dividend for 2012.
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After pulling back from shipping finance, commercial real estate and public sector lending, Commerzbank now says it will overhaul its retail branch network as economic pressures mean clients are steering clear of higher margin services.
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Germany’s retail banking market is highly competitive and industry experts say that Commerzbank – which bought rival Dresdner bank in 2008 – still has not focused enough on costs cuts and could easily slash another 20 percent of staff.
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Commerzbank said it would present a new strategy on November 8. In the first half of the year it focused on fulfilling new capital rules, designed to help the financial sector weather the euro zone storm.
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The bank, which received an 18 billion-euro bailout in the wake of the financial crisis and collapse of Lehman Brothers, has spent years restructuring as Greek debt writedowns and a slowing euro zone economy hurt its efforts to get back on its feet and build capital to meet new European rules.
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