Commmerzbank vows to turn new page after tough 2016

Germany's second-largest lender Commerzbank downplayed a sharp slowdown in 2016 Thursday, saying it will win new customers and become more competitive with a deep restructuring.

The bank booked net profits that were down more than 74 percent last year at 279 million euros ($298 million), but that still beat the 222 million forecast by analysts surveyed by Factset.

Lower profits had been on the cards for the lender since it forecast only that it would not post a loss as it released its third-quarter results last year.

At 1.4 billion euros, operating profit was down 28 percent, while revenues showed a more modest drop, falling around 4.0 percent to 9.4 billion euros.

"We want to make Commerzbank the most competitive bank in Germany by 2020," chief executive Martin Zielke told a Frankfurt press conference, adding that he hopes to woo two million new customers by that date.

"We've created the necessary space to manouevre and can move on to the implementation" of a new strategy unveiled in September, he said.

Shares in the bank had lost 3.18 percent to trade at 7.49 euros ($8.00) by 1215 GMT, trailing the DAX 30 index of leading German shares which had climbed 0.68 percent.

- Fierce headwinds -

Commerzbank invested some 129 million euros into restructuring expenses in 2016, as Zielke seeks to return its focus to the core activities of lending to households and businesses and slash some 9,600 jobs by 2020.

The bank also plans to digitise many of its internal processes and deepen its online offering to customers.

But challenges on several fronts make setting a new direction even more difficult.

Along with other German banks, it faces stiff headwinds from low interest rates and intense competition thanks to a crowded domestic market and the arrival of new digital competitors.

And the bank said it had set aside some 900 million euros to cover loan losses, an increase of more than 200 million over 2015 as it remains exposed to struggling shipping firms.

"Commerzbank's results show that without new demand for investment and higher interest rates, it won't be able to improve its profitability," analyst Jochen Stanzl of CMC Markets said, while allowing the bank was "ready for an economic upturn".

- 'Not satisfied' -

"We can't be satisfied with the quality of the results" published Thursday, Zielke acknowledged.

Nevertheless, the group was able to offer some crumbs of good news about its progress last year.

Commerzbank increased its core capital ratio -- a key measure of solvency used to judge its resilience to future financial shocks -- to 12.3 percent, from 12.0 at the end of 2015.

Like its bigger German rival Deutsche Bank, stress tests carried out last year showed that Commerzbank would be badly affected if a new financial crisis took hold.

The German government still holds a 15-percent stake in the lender, as it had to be rescued in the face of heavy losses in the 2008 financial crisis.

Commerzbank did not offer a forecast for its performance in 2017, but restructuring costs are likely to remain a burden.

Talks with labour representatives representing its roughly 50,000 personnel are scheduled to begin in a few weeks to deal with the job cuts called for by the new strategy.