DO I SENSE some early excitement around hoped-for future happenings at Commerzbank in the wake of the recently-unveiled restructuring? OK, on the basis that that no-one can be happy about the pain of heavy job cuts, excitement may not be le mot juste.
But there’s a definite sense internally that the strategic path the bank has chosen goes beyond just another cost-driven re-org. That is creating, let’s just call it, an incipient buzz. In the depressing place European banking finds itself in today, that’s unusual.
I’ve been doing a bit of digging around this story and it’s clear Commerzbank 4.0 is envisaged as a rewiring for the future. It’s a €700m banking-meets-fintech adventure that wholeheartedly buys the notion that finance will demand end-to-end and back-to-front digital solutions; not just to meet existing client requirements but driving and dictating future client requirements.
I was chatting the other day to a senior industry figure. He painted a wonderful picture of the state of play today where banks offering funky tech solutions at the front end are more like Chinese laundries at the back end, with hundreds of people toiling away and manually posting clean solutions through the front. [Note to Brits of a certain age: like that computer scene 7:50 into the magnificently silly 1970 film Carry On Loving].
Unlike the up, down or sideways of product, geographical, business or economic cycles, digitisation is being seen increasingly as a looming pervasive certainty in banking. Commerz has established a digital campus that will host focused work-streams aimed at driving aggressive process automation. Given CEO Martin Zielke’s stated plan is to have 80% of processes digitised by 2020, he will certainly have his fingers crossed; a mis-read of the direction of travel will be costly.
The digital push is by no means restricted to retail, consumer and private clients. It’s being pushed up and down the spectrum of corporate clients assigned to Private and Small Business Customers out of the former Mittelstandsbank, as well as larger MSB clients and those from the old Corporates and Markets that are both now housed in the shiny new Corporate Clients (CC) segment.
THIS IS NO nice-to-have initiative. Digital targets are coming with hard business targets behind them. Commerzbank, which says it has a 30% share of trade and export finance in Germany, plans to grow its market share via focused growth in the most important trade corridors for German and European corporate clients.
I imagine that’ll particularly be within its core sector skill-set of automotive and transport, chemicals and pharmaceuticals, engineering, energy and infrastructure, and consumer and retail. Beyond special-situation structured trade solutions, the bank’s offering in this critical area is already pretty much fully digitised.
The internationalisation of the corporate banking footprint in CC will see Commerz target clients with a turnover of €250m-plus. That will widen the universe of target names by several hundred, which I imagine will keep Roland Boehm, appointed head of Corporates International (CI) earlier this year, pretty busy.
The lender is also targeting market share gains among SMEs with €15m–€50m turnover, while in PSBC it’s targeting two million net new customers in Germany by 2020, attracted it hopes by digital multichannel banking, the digital instalment-loan platform and digital asset management (Robo-Advice).
And it wants to up its market share of small business customers to 8% by 2020, bringing revenue growth of at least €1.1bn. Ulrich Coenen, newly-appointed divisional board member for business customers in PSBC, has some track record in this arena, having joined the bank about 18 months ago as head of digital transformation for corporate banking in the MSB.
The digitisation strategy is alive and kicking in CC. The monolithic new division has been put into the capable hands of the very affable Michael Reuther, board member formerly responsible for Corporates & Markets. Reuther gained expanded responsibility as well as management control of half of the group’s €200bn in risk-weighted assets almost 10 years to the day after he joined Commerzbank. His MSB counterpart Markus Beumer opted to stand down and is leaving the bank at the end of the month.
Following a series of changes, Reuther has his ducks in a row on the executive front across 13 sub-segments. To keep his digital train running, Jan-Philipp Gillmann is relocating from New York (where he had overall responsibility for the bank in North America) to Frankfurt to run a new unit: Segment Development and Digitalisation.
On the product side, Roman Schmidt continues to run Advisory and Primary Markets, while Nikolaus Giesbert’s Fixed-Income and Currencies unit (FIC) will initially lose some ballast as the bank exits structured derivatives and slims credit and rates trading, but it’ll garner a more classic FICC orientation as it gains the commodity hedging activities currently residing in Equity Markets & Commodities (EMC).
The remainder of EMC has been ring-fenced into a separate legal entity. That screams “sale” to me and I would expect the residual structured equity and commodity investment products business, run by equity derivatives man Roberto Vila-Freyer, to be offloaded down the track.
In other CC changes, Stefan Otto (previously regional board member for MSB in Asia) is taking over MSB North from Günter Tallner (who is leaving to join NordLB). Jochen Ihler and Holger Werner are stepping down from their positions respectively overseeing MSB Central and MSB Eastern as Michael Kotzbauer (previously responsible for corporate banking) takes over a new grouping: MSB Central/East.
It’s early days yet and the bank’s depressed share price – which has the added burden of trading in sympathy with Deutsche Bank more often than not – isn’t yet factoring in any restructuring upside amid sector and idiosyncratic headwinds. But investors and shareholders are doubtless figuring out the timing of any entry points on the basis that if they wait until the plan shows signs of working it’s likely to be too late.
