Commerzbank suffers greater loan loss from Wirecard than Covid-19 debt

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Commerzbank was hit more by the Wirecard collapse in the second quarter than by the economic fallout from the coronavirus pandemic, according to people familiar with the matter.

Germany’s second-largest listed lender, which is in the throes of a leadership crisis after its chairman and CEO announced their resignation last month, has canceled € 175m in loans to the former provider payment who filed for insolvency in June.

Provisions for loan losses linked to the pandemic stood at 131 million euros, the lender said when the results were released on Wednesday.

Commerzbank’s operating profit slumped 34% to 205 million euros in the three months to June compared to a year earlier, while its net profit fell 21% to 220 million euros.

Both figures were better than analysts expected, but the bank warned investors it would go down to a full-year net loss as credit losses and restructuring charges would likely increase.

Commerzbank did not name Wirecard in its earnings release, but said the provisions contained a € 175 million “one-time” charge. People familiar with the details told the Financial Times it was linked to Wirecard.

The lender was part of a consortium of 15 banks that provided a € 1.75 billion revolving credit facility to the collapsed fintech. When the Wirecard collapsed, 90% of this amount had been withdrawn. Commerzbank, which was one of the four main arrangers of the loan, provided € 200 million to the credit facility.

The group’s level one common stock ratio – a fundamental benchmark of its balance sheet strength – stood at 13.4% at the end of the quarter, up from 12.9% a year ago. Its return on equity fell a quarter to 2.9%.

On Monday, the bank challenged its second shareholder, Cerberus, by electing Hans-Jörg Vetter, the former chief executive of German public lender LBBW, as its next chairman. Cerberus had previously raised “serious doubts” that Mr. Vetter was “the right person for this job or has the right experience for it”. On Tuesday, the private equity group promised to work constructively with the new chairman despite his reluctance.

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