Commerzbank takes bigger hit on loans from Wirecard than Covid-19 debt

Commerzbank took a greater hit from the collapse of Wirecard in the second quarter than from the economic fallout of the coronavirus pandemic, according to people familiar with the matter. Germany’s second-largest listed lender, which is embroiled in a leadership crisis after both its chairman and chief executive announced plans to resign last month, wrote off €175m of loans it made to the defunct payments provider which filed for insolvency in June. Loan-loss provisions relating to the pandemic stood at €131m, the lender said when it reported results on Wednesday.

Commerzbank’s operating profit collapsed 34 per cent to €205m in the three months to June compared with a year earlier, while its net profit fell by 21 per cent to €220m. Both numbers were better than expected by analysts but the bank warned investors that it would swing to a net loss for the full year as credit losses and restructuring charges were likely to rise. Commerzbank did not name Wirecard in its earnings release but said that its provisions contained a €175m charge “from a single case”. People familiar with the details told the Financial Times that this was related to Wirecard.

The lender was part of a consortium of 15 banks which provided a €1.75bn revolving credit facility to the collapsed fintech. At the time of Wirecard’s collapse, 90 per cent of this had been drawn. Commerzbank, which was one of four lead arrangers of the loan, provided €200m to the credit facility. The group’s common equity tier one ratio — a core benchmark of its balance sheet strength — stood at 13.4 per cent at the end of the quarter, up from 12.9 per cent a year ago.

Its return on equity dropped by a quarter to 2.9 per cent. On Monday, the bank defied its second-largest shareholder, Cerberus, by electing Hans-Jörg Vetter, the former chief executive of state-owned German 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 its misgivings.