Three years into Commerzbank AG Chief Executive Officer Martin Zielke’s turnaround, the party’s over.
Shares of the lender fell to a record low, capping a roller coaster ride that saw the stock more than double after the CEO announced his plan, buoyed by expectations for higher interest rates and consolidation in European banking. Zielke has refocused the bank on lending to corporate and individual clients in Germany, turning it into a proxy for economic growth and interest rates in the region that attracted investors such as Cerberus Capital Management.
But all those gains evaporated over the past year-and-a-half, as trade tensions took a toll on the economy. Prospects for European banking mergers were shattered when talks between Commerzbank and Deutsche Bank AG failed and no alternative suitors came forward, despite reports of interest from banks such as ING Groep NV and UniCreditSpA. A reversal in expectations for interest rates that pushed Germany’s entire yield curve below 0% for the first time sealed the stock’s decline.
For banks, low or negative rates are bad because they rely on clients paying to borrow money. Commerzbank, which had already abandoned most of the financial targets set by Zielke’s turnaround plan, said this month that its profit goal for 2019 is also looking increasingly “ambitious” amid worsening trade conflicts and the prospect of even lower interest rates.
Commerzbank fell as much as 3.3% in Frankfurt to 5.08 euros, the lowest in Bloomberg records going back to 1992.