New Commerzbank CEO prepares road ahead with $1.8 billion write-off

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FRANKFURT (Reuters) – Just a week into the job, Commerzbank’s new chief executive on Friday made a 1.5 billion euro ($1.84 billion)goodwill write-off at the German bank and raised risk provisions relating to the coronavirus pandemic.
Shares in Germany’s second largest bank fell 3% after the announcement by new chief executive Manfred Knof, which was seen as an indication that Commerzbank will post a larger loss than analysts had been expecting.

Commerzbank is working on a strategy update under Knof in an effort to improve profitability, and the new CEO has warned that the bank needs “a fundamental transformation”.

The goodwill writedown was “due to deteriorating market parameters”, including low interest rates in the euro area and Poland, where it has a presence, Commerzbank said.

“After this balance sheet clean-up, we are well prepared for the road ahead of us,” Knof said in a statement. “Our goal is to make the bank more profitable in the long-term.”

Commerzbank increased its risk provisions related to the coronavirus pandemic to at least 1.7 billion euros, up from its previous guidance of 1.3-1.5 billion euros.

The increase takes into account the impact of a second lockdown currently taking place in Germany, it said.

“By increasing our risk result we are responding to the ongoing corona pandemic and feel well prepared for further developments,” Chief Financial Officer Bettina Orlopp said.

Last week Commerzbank said it would book 610 million euros in restructuring charges in the fourth quarter after reaching a deal with staff on previously announced job cuts.

Analysts had been expecting Commerzbank to post a loss of more than 300 million euros for 2020 when it is scheduled to report earnings on Feb. 11.

($1 = 0.8169 euros)

Reporting by Tom Sims and Patricia Uhlig; Editing by Thomas Seythal and Alexander Smith

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