(Bloomberg) -- Commerzbank AG increased the amount it will pay for a job cuts program to more than 2 billion euros ($2.4 billion), as Chief Executive Officer Manfred Knof overhauls the lender to boost profitability.
The German bank's anticipated costs of “slightly above” 2 billion euros compares with an earlier estimate of about 1.8 billion euros. The lender raised its estimate to account for retirement payments after announcing an agreement with the company's works council on thousands of job cuts in Germany.
Knof presented a four-year turnaround plan in February that's centered around cutting about a fifth of the lender's costs and a quarter of its domestic workforce. At the time, he also promised to quickly reach agreement on the cuts with powerful works councils. Strong labor laws give employee representatives half the seats on the supervisory board as well as far-reaching rights to be heard in staff reduction programs.
Commerzbank has already booked 1.4 billion euros of the total costs and it said it will book the remainder of the headcount-related expenses in the second quarter, without quantifying them.
“This money is well invested as it enhances our planning certainty for the implementation of the headcount reduction,” Knof said in a statement on Friday.
The additional costs come after the lender previously said it expects to record a second straight annual loss this year because of restructuring expenses. Commerzbank will try to avoid involuntary dismissals to reach its headcount reduction goal. But it will assess progress in 2023 and may start firing people against their will if it has been too slow, it said in the statement.
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