Much better than expected third quarter results at Commerzbank don’t change the harsh truth: Germany’s second biggest bank is going nowhere. Chief executive Martin Zielke’s new three-year strategy falls well short of what is necessary to revive it.
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Martin Zielke, |
There are spots of brightness in what Zielke wants to do ‒ like integrating digital bank Comdirect, which could avoid cannibalization and bring together the group’s digital investment. But, overall, the plan is more like an admission of weakness than a recovery strategy, mainly involving paying for redundancy settlements with the sale of one of its best assets (mBank, in Poland).
It is, of course, understandable that Zielke is lowering his medium-term profitability targets: because the last ones turned out to be so unrealistic. He previously targeted a return on equity of more than 6% next year. He is struggling even to get to 3% this year. The extent of his ambition is now to reach 4% by 2023.
These targets, ultimately, are irrelevant, as the bank’s position is miserable either way. The bank is not losing money, but that is not sufficient to make it attractive for long-term investors, who will always look for decent income from a firm of this age and size.