FRANKFURT Commerzbank's (CBKG.DE) Chief Executive announced that he is to waive his 700,000 euro bonus for 2012 and warned investors not to expect a dividend from what will be a difficult 2013.
Germany's second-biggest lender, which received an 18 billion-euro government bailout at the height of the financial crisis, said that this year's earnings will take a hit from a slowing economy and charges for cost cuts in its drive to make the bank more resilient.
"The current year will not be an easy year," Chief Executive Martin Blessing said on Friday, adding that a dividend payment for 2013 was unlikely. "Strengthening our capital will continue to be our priority."
Cut-throat competition and shrinking margins are forcing lenders across Europe to review their business. While Swiss peer UBS UBSN.VX is firing 10,000 bankers, Barclays (BARC.L) is axing at least 3,700 jobs and German bellwether Deutsche Bank (DBKGn.DE) is cutting 2,000 positions.
Commerzbank has warned that more charges are to come. It will take a hit of about half a billion euros in the first quarter of 2013 from a move to cut up to 6,000 jobs by 2016.
"2013 will be the year of change. And this change will cost energy, money and time," Blessing said, adding that he hopes to conclude negotiations with the works council on job cuts by the summer break.
The bank this month posted a slump in 2012 net profit to 6 million euros ($8 million) from 638 million a year earlier. Its loan loss provisions rose to almost 1.7 billion euros from 1.4 billion euros.
Traders welcomed Commerzbank's pledge to continue to increase its capital cushion to cover potential losses, which helped the shares to gain 2.9 percent by 1240 GMT, outperforming a 0.3 percent decline in the sector index .SX7P.
The bank, whose core capital ratio stood at 7.6 percent at the end of 2012, said it would take another two to three years to reach bank regulators' target of 9 percent by 2019.
In general, however, investor confidence in Commerzbank remains low. The bank's shares trade at 0.4 percent of its expected book value for the next 12 months, against an average of 0.7 percent among its European peers.
Commerzbank, which specializes in lending to small and medium-sized companies, the backbone of Germany's economy, said that it expects a revival of the German economy early this year and a chance of strong growth in 2014.
Recent data showed that Germany's economy shrank in the fourth quarter more than at any time since the height of the 2009 financial crisis and may have underperformed the wider euro zone for the first time since then.
Commerzbank did not provide a detailed outlook for its 2013 earnings. In November it lowered its 2016 return on equity target to about 8 percent at group level, setting a goal below the industry's average cost of capital of 10-12 percent.
After announcing his own bonus sacrifice, CEO Blessing said that 2012 variable remuneration across the bank had shrunk 17 percent, with investment bankers earning 20 percent less in bonuses.
The investment banking unit slid to a fourth-quarter pretax loss of 69 million euros from a profit of 27 million a year earlier.
By contrast, its Mittelstandsbank division, which finances medium-sized German companies, posted a 30 percent rise year on year with fourth-quarter pretax profit of 376 million euros. ($1 = 0.7495 euros)
(Editing by David Goodman)