Frankfurt It should be one of the more interesting board meetings in recent history Commerzbank become. When the control committee meets on Monday afternoon, the eight women and twelve men have one main task to solve: they must end the management chaos that paralyzes the bank after the surprising revolt by Cerberus, the major American shareholder, as quickly as possible.
At the meeting of the supervisory board, after the double resignation of CEO Martin Zielke and supervisory board chairman Stefan Schmittmann, a decisive step should be taken, at least when looking for a new chief controller.
In the past few days, Hans-Jörg Vetter has emerged as a favorite for the post. According to information from financial circles, the former head of Landesbank Baden-Württemberg (LBBW) is to be proposed to the supervisory board as a candidate. Vetter is a recognized renovation expert.
But the conflict surrounding the future strategy and the restructuring of Commerzbank would not have been resolved even with the choice of the ex-Landesbanker. Because among the major shareholders of the second largest German private bank, there are considerable reservations about the 67-year-old.
Among other things, his age spoke against Vetter, the critics complain. The ex-Landesbanker could at best be a transition candidate, but Commerzbank needed a permanent solution at the top of the supervisory board for the difficult restructuring. In addition, Vetter has been out of business for three years and has no experience in managing a listed major bank. He also lacks the expertise in important private customer business and digitization. Overall, Vetter is therefore the wrong candidate for Commerzbank.
However, there are also institutional investors who support the former LBBW boss: “Vetter would be a veritable head of the supervisory board. It is good that he is familiar with restructuring. He did a good job at LBBW and put the bank on a sound footing, ”says a major investor who has a stake in Commerzbank.
Paralyzing leadership chaos
Vetter is considered an experienced renovator. In 2009, he moved to the top of LBBW for seven years in the financial crisis, which had faltered due to the high-risk business with complex financial products and had to be saved by the state owners. Previously, he had a similar reorganization job at the top of Bankgesellschaft Berlin. Vetter should therefore have the necessary industry expertise that European banking supervisors expect in this position.
Jutta Dönges was tasked with finding a suitable candidate. The head of the federal finance agency is one of the two supervisory boards that the federal government had recently sent to the Commerzbank supervisory body. Because of the state’s rescue of the bank during the financial crisis, the federal government still holds 15 percent of the institute.
Commerzbank has been paralyzed by a management chaos for almost a month, into which they plunged the surprising resignations of the supervisory board chairman Schmittmann and Zielke in early July. Schmittmann’s successor is the most urgent because the incumbent chairman of the supervisory board will leave the committee at his own request next Monday.
Due to the controversy surrounding Vetter, the signs are already in dispute before the important Supervisory Board meeting on Monday. In financial circles it is said that Vetter did not bring himself into the position at Commerzbank, that he had been asked to do so several times and would only take on the task if the environment and conditions were right.
According to information from the Handelsblatt, Vetter has so far had no contact with the rebellious shareholder Cerberus. This is noteworthy in that the US financial investor, with his violent criticism of the Commerzbank strategy, had also triggered the double resignation.
The US financial investor has had a good five percent stake in Commerzbank since summer 2017. Since then, the market price of the Frankfurt money house has plummeted by around 60 percent. The prominent US investor usually prefers to act discreetly in the background. But Comberbank participation apparently frustrated Cerberus so much that the Americans went on the offensive.
A letter from early June to supervisory board chairman Schmittmann, which leaked to the public, leaves nothing to be desired in terms of clarity: “The immature and poorly implemented management efforts to prevent Commerzbank’s decline demonstrate a level of negligence and arrogance that we no longer want to accept. “
The relationship between Cerberus and Commerzbank was heavily burdened even before the fire letter. Since joining the company, the American investor has pushed for changes in over 70 meetings – including with CEO Zielke, supervisory board chiefs Stefan Schmittmann and Klaus-Peter Müller, and finance directors Stephan Engels and Bettina Orlopp.
The Americans had repeatedly called for Commerzbank to be supported by the Cerberus consultancy division COAC in its restructuring. However, Commerzbank management always rejected this because it sees a conflict of interest in Cerberus acting as both a major shareholder and a consultant.
In the June letter, Cerberus called for two seats on the supervisory board and significantly more radical cuts to get the problems of the institute under control. Previously, Zielke’s conversion plan, which he presented in autumn 2019, had already failed at the most important major shareholder, the federal government.
Only when the management vacuum is filled will Commerzbank be able to initiate the planned far-reaching restructuring. According to financial circles, the sharpened plans have so far cut 10,000 jobs and closed half of the branches in order to raise the return on tangible equity to seven percent in the medium term.
Commerzbank originally wanted to present its tightened austerity plan next Wednesday together with the half-year figures to the public, but the search for a CEO delays the project. Because the new man or woman at the top will certainly want to set their own accents in the strategy.
Corporate client chief Roland Boekhout and chief financial officer Bettina Orlopp are the internal favorites for the Zielke successor. Should an external person run the ex-Landesbanker Vetter for the supervisory board position, this would increase the chances for internal candidates for the chair of the board, since they already know the bank and its problems and would be immediately available.
Problems in the corporate business
The bank’s problems will also be reflected in the figures for April to June this year, which are due next Wednesday. Analysts interviewed by the Frankfurt money house on average expect profits to shrink from EUR 271 million to EUR 95 million in the second quarter. The experts fear an operating loss of 134 million euros for corporate customers. The Group’s provision for loan defaults is estimated to skyrocket from EUR 178 million to EUR 475 million. For the full year, the forecast is a loss of 320 million euros.
In addition to the corona crisis, Commerzbank is likely to be the bankruptcy of the scandal group Wirecard hit hard. The outgoing CEO, Zielke, once described the collapsed payment provider from Aschheim near Munich as a “good customer”. The bank, which was pushed out of the Dax by Wirecard in September 2018, will probably have to write off a EUR 200 million loan to the group.
More: How the Commerzbank scandal came about.