Commerzbank’s New Chairman Faces Investor Ire Amid CEO Hunt

(Bloomberg) -- Commerzbank AG's new chairman Hans-Joerg Vetter has drawn shareholder ire even before he tackles the tricky task of finding a chief executive officer for an ailing bank notorious for its warring factions of investors.

The lender's supervisory board on Monday confirmed Vetter's appointment and a court ratified it the following day. It was made despite the strong objections of Cerberus Capital Management, the German lender's second-largest and most vocal shareholder.

Finding a modus vivendi with Cerberus is just one of Vetter's immediate challenges. Hiring a new CEO after the incumbent, Martin Zielke, resigned last month is arguably even more daunting. Although the bank's need to intensify a cost-cutting plan calls for swift action, Vetter will likely initiate a thorough recruitment process that will involve a headhunter, a person familiar with the matter said.

Zielke has said he's willing to stay until the end of the year, effectively giving the chairman almost four months to complete the search. Corporate clients head Roland Boekhout is the leading internal candidate, with Chief Financial Officer Bettina Orlopp an alternative. The search will also consider external options, Bloomberg has reported.

Once a CEO is hired, Vetter will need to help set and implement a new strategy for a lender that hasn't provided an adequate return for shareholders in over a decade and has long been considered a takeover target.

Vetter's reputation as strong-willed and even stubborn may serve him well, and it's one reason the group of supervisory-board members mandated to find a new chairman selected him.

Vetter has “the necessary experience and assertiveness that the bank needs in this phase,” Jutta Doenges, who led the group and serves as one of two German government representatives on Commerzbank's supervisory board, said through a spokeswoman. “I am convinced by Mr. Vetter and I'm pleased that the supervisory board has unanimously followed the motion” to appoint him.

The government is Commerzbank's largest shareholder, with 15.6% compared with Cerberus's stake of 5%.

Opposing Views

Vetter's persistent refusal to meet with Cerberus ahead of his appointment is one reason why the investor opposed him, the private equity firm indicated.

Labor representatives have privately criticized him for his lack of experience in retail banking -- Commerzbank's biggest source of revenue -- as well as in digitalization and leading a publicly traded company, Bloomberg has reported.

Vetter was CEO of Landesbank Baden-Wuerttemberg, a regional and largely state-owned lender, between 2009 and 2016, and he's credited with shrinking it back to size after the financial crisis pushed it close to meltdown. LBBW's balance sheet decreased by almost half and the workforce shrank by a fifth during his tenure.

That experience is important for Commerzbank. Before Zielke quit last month, he was working on a radical overhaul after both the government and Cerberus had made clear to him that his previous efforts to boost profitability had fallen way short of expectations. Under that plan, Zielke would have cut about a quarter of the workforce, closed as many as 80% of the branch network, and shrunk its foreign presence.

Takeover Target

The new CEO will likely have to increase those cost-cutting goals to appease the government and Cerberus, according to a person involved in the discussions.

But any previous deep cost-cutting plans have run into opposition from the bank's powerful labor unions, though they have signaled that they're willing to accept thousands of job cuts this time if those are stretched over a several years. This would effectively mean they'd happen largely through attrition and early retirement rather than layoffs.

At some point, Vetter will likely also have to deal with renewed efforts by other lenders to buy Commerzbank. The bank was in merger talks with Deutsche Bank AG in spring 2019, and even though both sides agreed to break off talks, they could be revived if one of the two is in trouble.

There's also been interest from banks outside Germany including BNP Paribas SA, ING Groep NV and UniCredit SpA, Bloomberg has reported.

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