Forbes Magazine reports that Commerzbank plans to cut around 350 jobs at its investment banking unit, over a quarter of the division's workforce.
The magazine quotes unnamed 'company source' who told Reuters: 'There will be significant cuts in investment banking with some sites abroad being affected. The bank also wants to pull out of some of its fringe investment banking activities.' The cuts are thought to most likely take place in London and Tokyo.
Commerzbank employs around 1,300 staff in its securities division. According to Bloomberg, it currently ranks 128th in global mergers and acquisitions. The bank's third quarter results revealed a pre-tax loss of £84m and a full year loss for 2002 cannot now be ruled out.
The problems Commerzbank is facing appear typical of those facing the German banking industry. With wholesale banking leeking money, German banks are also struggling back home in the retail market. The German retail banking system is outdated and old-fashioned.
As the New York Times points out, Commerzbank, with 750 branches in Germany, has around 2% of the total branch network in the country. The five largest banks only have around 10% of the total between them. In comparison, Barclays has 12% of all branches in Britain and BNP Paribas around 9% of all branches in France. The German market is ripe for consolidation, but much of the sector is owned by state or federal organisations.
The German economy has become the sick man of Europe and the German banking industry is at the centre of all the malaise. The federal government will need to act and act quickly. Rationalization is surely the only answer and this can only happen if steps are taken to relax the country's draconian and uncompetitive labour laws.