Germanys second-biggest listed lender features seldom felt even more worth its nickname. commerzbank, or funny bank as numerous into the city of london have long labeled it, may not be a barrel of laughs for administration, and for beleaguered people whoever shares are actually really worth hardly a fifth of these net asset value.
But there is a particular gallows humour in news early this thirty days that accident-prone commerzbank was among the list of biggest losers from lending toward defunct corporate fraud wirecard, using a 175m charge with its second-quarter records (significantly more than the price of coronavirus), a few weeks following the financial institutions chairman and leader had suddenly resigned.
Commerzbank defends its credit record, pointing to an aggregate of less than 1 per cent non-performing financial loans. nevertheless the 180m loan to wirecard, equivalent to 3 percent of this financial institutions market capitalisation, had been an alarmingly bold punt all the same.
Like a lot of the german institution, commerzbank had been an ardent supporter of this once booming fintech for some time. in february 2019, the afternoon after the financial occasions published a damning early-warning article about alleged fraud at wirecard, a commerzbank technology analyst called heike pauls published a gushing defence of wirecard, accusing the ft of fake news and making personal allegations against the lead reporter on the article.
The financial institution, which insists that robust chinese wall space bar analysts from becoming impacted by lending exposures, could not explain ms pauls knee-jerk note, but withdrew it 24 hours later. she stays in her own task, and maintained a bullish position on wirecard right up to its collapse in summer.
And yet, for all its problematic credit decisions and weak equity analysts, there clearly was reason enough to be positive about commerzbank. veteran german finance companies analyst stuart graham at autonomous said the opportunity for brand new management is extremely interesting, if only because it is hard to believe there is anybody remaining is let down.
One key plus: commerzbank features a large active trader, united states hedge fund cerberus, this is certainly therefore frustrated with progress and the report losses on its 5 per cent stake that it is pushing ever more aggressively for modification. it attempted and neglected to engineer a merger with deutsche bank, in which furthermore a respected shareholder. plus the twin deviation of commerzbanks chairman and leader, authors of an uninspiring turnround plan, arrived after developing stress from the trader. the german federal government, commerzbanks biggest shareholder, has been galvanised too, parachuting in new associates into the supervisory board and telling prospective candidates for chairmans work that it would not stand in just how of a transformative cross-border offer, whilst had in the past.
Contrast this state of mind of dynamism with one of commerzbanks french colleagues. socit gnrale, frances number 3 lender, has also been the subject of the wringer lately. its second-quarter results had been even worse than commerzbanks a 1.3bn net loss versus the german financial institutions 220m net revenue.
For socgens shareholders this would be a wake-up telephone call. socgen has fundamentally more profitable franchises, with property market which structurally much more lucrative, than commerzbanks. additionally, it is a far bigger bank. yet its price-to-book ratio is identical, at about 20 %.
Granted, chief executive frdric ouda promised decisive activity to shake up the equity derivatives company that was blamed for bad mis-steps in the 1st half of the entire year. he also rejigged administration, ditching two of their four deputies.
But there seems small force from the board or from investors going more. mr oudas very own position, 12 years after he took over as leader, seems because entrenched as previously despite the 75 percent decline in the share price on their view.
Both banking institutions are in theory vulnerable to takeover, if sufficiently strong-stomached purchasers occur. a deep failing that, assuming policymakers and investors apply sufficient pressure, a socgen-commerzbank combination will make some good sense it would undoubtedly signal that everyone is dedicated to one european market for finance companies, and throw up sufficient opportunity for further cost-cutting, some thing europes relatively tiny, but horribly distended banks desperately require. perhaps permanently measure, throw-in italys unicredit, which plunged to a 2.3bn first-half reduction and has made little key of the curiosity about relates to both socgen and commerzbank.
If cerberuss desire for food for danger is unspoilt by its german activities, plus it fancies doubling-down on european banking institutions, it could do even worse than buy into socgen and unicredit and begin agitating there.