London reductions Commerzbank Shake-Up Gathers Steam

Germany's second-largest bank, struggling to maintain profit as it divests loss-making side businesses, plans to transfer 340 jobs from London to the continent as it seeks to boost the efficiency of how it processes high-volume trading for customers.

The restructuring of Germany's second-largest bank, Commerzbank, took further shape on Thursday as the bank announced plans to reorganize the back-office support of its London investment banking activities in moves affecting about 340 workers.

The bank, 18-percent owned by the German government, said it planned to relocate about 70 investment bankers involved in currency and interest-rate trading from London to Frankfurt, and move another 270 contractors who specialize in computer- and transaction processing of trades from London to either work from home or from Commerzbank offices in Frankfurt and Eastern Europe.

The moves are part of the bank's efforts to focus its investment banking operations around five hubs -- New York, London, Frankfurt, Hong Kong and Singapore. As part of the reorganization, Commerzbank is basing its high-volume, standardized investment banking activities, which includes most of its currency and interest-rate swaps business, in Frankfurt.

The moves are not a signal that Commerzbank is retreating from London, Europe's financial capital, a spokeswoman said.

"London remains key to Commerzbank's international operations and the investment bank's offering to clients remains unchanged across all asset classes,'' said Margarita Thiel, a Commerzbank spokeswoman in London.

London remains key to Commerzbank's international operations and the investment bank's offering to clients remains unchanged across all asset classes. Margarita Thiel, A Commerzbank spokeswoman in London

The decision to relocate the London-based information technology staff -- the people who maintain Commerzbank's trading platforms and process hundreds of thousands of orders each day -- is designed to increase the proportion of workers who deal directly with clients as opposed to order-processing. Commerzbank has traditionally employed more than 1,000 people in London.

The German bank in 2004 was one of the first major financial institutions to voluntarily close its proprietary trading operation in London, which drew criticism at the time but eventually became the industry standard as overseers demanded stricter conflict-of-interest controls. The bank bought Dresdner Bank, Germany's third-largest bank, just before the onset of the global financial crisis.

 

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The timing of the takeover nearly brought down Commerzbank, which was saved at the depths of the crisis with €18 billion ($21 billion) in emergency funding from the German government, which eventually became its biggest single shareholder.

The reductions were first reported by Bloomberg, which cited an internal Commerzbank memo.

Commerzbank generates about €2 billion each year from its investment banking activities.

Revenue at the bank's fixed income and currency unit rose to €134 million in the third quarter from €122 million a year earlier. In its third-quarter report, the chief executive, Martin Blessing, said that the "difficult environment for banks had continued'' and said the institution was pressing ahead with efforts to retool its operations to be more customer-centric.

In a Jan. 15 interview with Handelsblatt, the head of Commerzbank's private clients business, Martin Zielke, said the bank would cut 260 jobs in Germany -- eliminating a layer of middle managers -- as it combined its domestic private clients business with its lending operations to small- and mid-sized companies.

Commerzbank is in the midst of cutting 5,200 positions by the end of 2016, in a bid to boost profit and respond to changes in the industry.

 

Kevin O'Brien is a former Bloomberg Frankfurt and Vienna bureau chief and covered technology for The International Herald Tribune and New York Times for a decade. He is editor in chief of Handelsblatt Global Edition. To contact the author: [email protected]