Commerzbank has announced it will cut nearly 10,000 jobs and stop paying dividends for the time being as it restructures to become profitable on a more sustainable basis by 2020. As Sonia Legg reports, the news comes as worries persist over Deutsche Bank despite their shares recovering from record lows.
It's been a bad week for German banks. The latest blow - 9,600 job cuts at Commerzbank. That's more than a fifth of the work force. (SOUNDBITE) (English) WILSON KING INVESTMENT MANAGEMENT, HEAD OF RESEARCH, RICHARD HUNTER, SAYING: "German banks as with most European banks under pressure at the moment, low interest rates, difficult trading environment. As a measure of prudence they've decided to chop those 10,000 jobs. They've also suspended the dividend and despite that news the markets initial reaction was that the shares ticked up slightly. Obviously the market realises that is quite a prudent move." Germany's second biggest lender will combine business segments and continue a shift to digital banking. It's expecting restructuring costs of 1.1 billion euros. The cuts are far more drastic than those being implemented by its bigger neighbour. Deutsche Bank is axing 10 percent of its workforce, although some suspect that may be about to increase. News of a potential $14 billion fine by U.S. authorities sending shares to record lows this week. (SOUNDBITE) (English) WILSON KING INVESTMENT MANAGEMENT, HEAD OF RESEARCH, RICHARD HUNTER, SAYING: "The general feeling is the eventual fine won't be anything like that amount but even at half that amount it may force Deutsche Bank into some sort of capital raising exercise, despite the fact that the capital cushion is much better than it was during the financial crisis." The German government has denied it's working on a rescue plan for Deutsche Bank. But either way the turmoil at the top two lenders in the euro zone's biggest economy is being closely watched.