Commerzbank Boss The Second-Best Solution

The new head of Commerzbank has many impressive qualities, but an outside candidate would have been preferable, writes Handelsblatt's Michael Maisch.
A second-best CEO choice at Germany's second-largest bank.

One's reach should always exceed one's grasp - this clearly applied to Commerzbank's hunt for a new chief executive.

At the beginning of the search, the federal government, as a major shareholder, made its wish clear: The successor of Martin Blessing was to be an outsider, female and have international experience; now, just a few months later, the new chief executive is a German male from within the company.

On Sunday, the supervisory board chairman of the Frankfurt bank named retail banking head Martin Zielke as the new chief executive. In light of the original requirements, which were certainly set for a reason, it must be abundantly clear that Mr. Zielke was not the ideal candidate for the top job.

Mr. Blessing and his predecessor, Klaus-Peter Müller, also came to the job from within the bank. After 15 years, it is high time to inject fresh blood into the position.

This doesn’t necessarily mean that the 53-year-old will be a bad chief executive. He does bring some important qualities to the job: intellectual independence, tenacity and decisiveness. And by restructuring the retail banking business, he has already demonstrated that he is also capable of successfully handling unpleasant and difficult tasks.

However, Mr. Zielke has not shown himself to be a charismatic leader who inspires his troops to enter battle enthusiastically. But his weak presence isn't the only reason an outside candidate would have been the better solution for the bank. Mr. Blessing and his predecessor, Klaus-Peter Müller, also came to the job from within the bank. After 15 years, it is high time to inject fresh blood into the position. The bank needs new ideas, and the candidate who can develop and implement such ideas is ideally someone who is not forced to make allowance for internal sensitivities or old relationships.

A simple "more of the same" isn't what Commerzbank needs. Mr. Zielke faces difficult challenges. Investors are urging the bank to become more efficient. Cost need to be brought down, and that means more painful cuts, including in Mr. Zielke's own area, the retail banking business. And that is still one of the easier tasks on the new boss's plate.

The old leadership under Martin Blessing did manage to stabilize the severely ailing bank after the financial crisis and provide it with an outlook for the future once again. The most important sign that this is the case is that the lender will finally be paying a dividend again in 2015.

But even at the end of the Blessing era, important strategic changes still haven't been addressed. The most pressing question is whether the business model, which focuses on small- and mid-sized German companies and retail banking customers, is sufficient to earn decent returns in the long term. When it comes to profitability, Commerzbank was significantly ahead of archrival Deutsche Bank last year. A net gain of €1.1 billion ($1.21 billion) compared to a record loss of €6.8 billion speaks volumes. However, a look at profits also shows that Deutsche Bank, with revenue of about €34 billion, is still playing in a completely different league from Commerzbank, with its revenue of just under €10 billion.

The question of the bank's future strategy becomes more pressing every day, as chronic low interest keeps cutting more deeply into margins. The expectations of the new meeting of the European Central Bank show that no relief is in sight for the foreseeable future. On the contrary, interest rates are likely to sink even more deeply into negative territory.

Another factor is the fear of a cooling economy. The bank is still benefiting from historically loan defaults. But this trend will eventually turn around, and it will likely happen sooner than later. Only when the waters become rough will it be apparent how seaworthy Commerzbank's business model really is.

Mr. Blessing and his supervisory board chairman, Mr. Müller, had already begun to cautiously orient Commerzbank more heavily toward other countries in Europe, so as to reduce the bank's strong dependence on the German economy. An external candidate with international experience would have been the ideal person to credibly advance this strategy.

As things stand now, it is not clear if Commerzbank has what it takes to continue existing as an independent bank, or whether it will enter into an international merger instead. It is now up to Mr. Zielke to show the way forward. 


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