Crowbars prise things open. manfred knof, newly-appointed chief executive of commerzbank, is reported to favour the tool above all others in negotiations. that suggests a man who can force change when needed.
This should appeal to commerzbanks owners, especially the german government. what lies within commerzbank? the countrys second-largest bank by market value is also its cheapest by tangible book value. years of false starts have led to a consistent loss of shareholder value. mr knof will need to make good on his tough reputation by shrinking the bank.
He has some form. his reputation comes as the result of completing domestic division restructurings of financial institutions, first at insurer allianz and most recently at deutsche bank. there he took credit for pushing through a simplification of its domestic corporate structure, approved by both the ecb and local watchdog bafin, which should lead to 100m of annual savings alone.
These changes helped deutsche to move forward with a plan to cut one-fifth of its retail branches from next year. the share price has outrun the broader dax index for much of the year. no wonder the supervisory board at commerzbank sought him out.
Although short sellers may beg to differ, things cannot get much worse for commerzbank, which is trading at a fifth of its tangible book value. yet there is hope for shareholders. consider commerzbanks corporate unit, which includes investment banking. mr knof could feasibly remove 900m of annual overhead there about 13 per cent of the groups costs, says citis nicholas herman.
That alone would lift the banks return on tangible equity to 5 per cent, improving the fair value per share by more than half to 5.6. moreover, commerzbank has the equivalent of 2.6bn of capital buffer, above its minimum common equity tier one requirement, to absorb restructuring costs.
Never mind thinking outside of the box, its getting inside that counts now. mr knof needs to roll up his sleeves and apply requisite pressure to lifting the lid at commerzbank.
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