FINANCIAL CHAOS: Deutsche downgrades Commerzbank as bosses cut nearly 10,000 jobs

FINANCIAL CHAOS: Deutsche downgrades Commerzbank as bosses cut nearly 10,000 jobs

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DEUTSCHE Bank has downgraded Commerzbank days after bosses announced 9,600 job losses and nervous investors questioned the outlook of the European Central Bank’s bond-buying programme.

By KATIE MANSFIELD AND MONIKA PALLENBERG
PUBLISHED: 18:33, Wed, Oct 5, 2016

Commerzbank’s securities fell by as much as 0.7 percent to 5.77 euros today as analysts at Deutsche Bank classified the title from “Buy” back to “Hold”, and reduced the price target from 9 to 6 euros.

Deutsche Bank analysts said Commerzbank’s new strategic program for 2020 should boost sales but will take longer than expected to achieve significant improvements.

Analysts wrote: “Although we expect a little revenue growth, we are much more cautious than management facing the low interest rate environment.”

It comes days after Commerzbank, the second-biggest bank in Germany, suspended its dividend and announced more than 9,000 job losses.

The financial group plans to merge its Mittelstand division with its corporate branch and scale back investment activity in a bid to boost earnings.

Commerzbank’s new chief executive Martin Zielke is expected to present his plans to the board for approval on Friday.

The major restructure will cost the bank nearly £1billion with bosses hoping to hire 2,3000 people in new areas as the bank attempts to make its business more digital over the next four years.

German banks have found their profits squeezed by the European Central Bank’s (ECB) ultra-low interest rates.

The prospect of the ECB eventually winding down its bond-buying stimulus programme rattled investors today, dragging stocks lower in Europe and Asia and pushing up government bond yields.

While an ECB spokesman said the bank had not discussed reducing the pace of its monthly bond buying, a Bloomberg report that the 80-billion a month programme would probably start winding down, has spooked markets to a degree.

The report comes as investors are wondering whether the central bank asset-buying stimulus programmes that have buoyed markets across the globe are reaching their limits.

ECB President Mario Draghi confounded the expectations of many in markets when he said after the bank’s last meeting that policymakers had not discussed extending its scheme.

Commerzbank analyst Peter Kinsell said: “The spokesman denied the story but there is probably some meat on the bone.

“They may extend by six months and then taper but the fact they are talking of getting out of it tells us the ridiculous levels on bund yields is not going to persist indefinitely.”

Deutsche Bank, which like other eurozone lenders has had its profitability questioned by the ECB’s ultra-low interest rates, recovered further from record lows hit last week in the wake of a £10billion claim by US authorities over a mortgage scandal.

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