Commerzbank to cut 3,900 jobs, mainly in Germany, as it seeks to fend off UniCredit

By Tom Sims and Patricia Weiss

FRANKFURT (Reuters) -Commerzbank said on Thursday it would cut 3,900 jobs and unveiled more ambitious financial targets as part of a strategy revamp designed to head off UniCredit's advances for a tie-up between the German and Italian lenders.

The job cuts, mainly in Germany and expected to take place by 2028, will be accompanied by hiring outside the country, meaning the bank's full-time positions will remain steady at 36,700, the bank said.

For months, Commerzbank's management, under the leadership of CEO Bettina Orlopp, has been working on the strategy update that she has said would reveal the "significant value potential" of the bank.

The battle for Commerzbank, pitting one of Italy's biggest banks against the German establishment, has become a test case of the country's ability to fend off foreign suitors and prevent its financial centre from losing one of its few remaining big commercial banks.

Commerzbank, the nation's No. 2 bank, is hoping that its raft of announcements on Thursday will convince its investors that it can thrive as an independent company.

Deutsche Bank analysts called the new guidance "bullish".

Commerzbank, which is partly state-owned and has labelled UniCredit's moves as hostile, said it would incur 700 million euros ($730 million) in restructuring charges in 2025.

It also said it would raise some of its 2027 targets.

It now targets net profit of 3.8 billion euros in 2027, up from a previous goal of 3.6 billion euros. In addition, it now aims for a cost-to-income ratio of 53% in 2027, more ambitious than a previous goal of 54%.

The bank's shares were flat in early Frankfurt trade, after gaining nearly 50% in the months since UniCredit expressed its interest.

Commerzbank's strategy update follows a better-than-expected 20% increase in full-year net profit, a result the bank believes illustrates the success of its turnaround in recent years.

"This provides us with a strong basis for the years to come," Orlopp said.

Andrea Orcel, the CEO of UniCredit, shocked Germany's corporate and political establishment last year when his Italian bank - also that nation's No. 2 - snapped up a hefty stake in Commerzbank and began pressing for a tie-up in the most ambitious attempt yet at a pan-European bank merger.

The job cuts will come through natural fluctuations and early retirements, the bank said, a move that avoids unsettling the remaining staff while underlining the bank's willingness to sacrifice some to avoid even worse cuts under UniCredit.

Hiring will take place at its operations in Poland and nearby cheaper locations.

The bank said it was on the hunt for targeted acquisitions and would focus on strategic partnerships.

That contrasts with big deals in the works in Spain, Italy and elsewhere. The CEO of the Dutch lender ING told Reuters he was looking for acquisition opportunities, potentially joining a wave of takeovers sweeping Europe.

UniCredit's Orcel, who has long considered a tie-up with Commerzbank, has said a combination between the two banks would be the best possible outcome, and said any offer could still be months away. He has not ruled out walking away.

Commerzbank's management, employees and the nation's chancellor, Olaf Scholz, have all spoken against a potential takeover, but at least one big investor and some business leaders favour talks.

Political defiance remains strong. Boris Rhein, the premier of Commerzbank's home state of Hesse, told a gathering of Germany's financial elite on Monday that UniCredit needed to give up.

"Nobody wants what you are doing. Withdraw!" Rhein said.

($1 = 0.9584 euros)

(Reporting by Tom Sims and Patricia Weiss; editing by Rachel More, Christopher Cushing and Tomasz Janowski)