Skip to main content

Commerzbank -- cuts dividends and 20% headcount reduction

Well its official

Monday speaking to some friends at Commerzbank it was clear that something was in the air!  No one knew what but senior staff was busy and unavailable for the past few weeks.  Now we know, dividends are out of the door this year (very very serious) and 20% of the staff will be let go -- blaming automation, but in reality what we are seeing is a cut back to the profitable business only. The bank did the same thing in the early '00; They looked at shutting down business and cut a lot of  "fat". Of course, the problem is that today's star can become tomorrow's dog, but that is of no concern to management.  Stop the bleeding is the first order of business!  In reality is that from the mount of the gods (e.g. the CEO's office) came down an edict: "Cut 20% of the workforce".

The impact is always the same:  going down the various levels the bosses decide what team to keep and what team to let go; its easier to get rid of entire teams -- its better for the overall moral, than cutting 20% of each team -- which creates paranoia (justified by the way).

The second round (because that's never enough to meet the 20% target) is get rid of people that have a "bad performance" followed by those who don't get a long, and then cut more because you have to cut numbers by 20%.  I've seen situations where a country team was let go and where the boss remained...

Independently of how painful the firing process is, the real issue here is the decision to cut the dividend -- bank stocks are considered blue chip income stocks, with a lot of pensioners counting on their dividends as income, it shows how serious the situation is as the bank now takes an aggressive stance on fixing its balance sheet.

Yesterday's words from Credit Swiss' CEO sound as powerful indication of things to come

No position on CS or Commerzbank


Popular posts from this blog

Trucker shortage? No a plan to allow driverless rigs

There are still articles on how America is running out of truckers -- and that its a huge problem, except its not a problem, if it was a problem salaries would rise to so that demand would clear. Trucking is one of those industry where the vast majority of participants are owner/operators and therefore free agents.

Salaries and cost are extremely well know, "industry" complains that there are not enough truckers, yet wages continue to fall... Therefore there are still too many truckers around, for if there was a shortage of supply prices would rise, and they don't.

What there is though is something different; there is a push to allow automatic rigs to "operate across the US", so to encourage the various authorities to allow self driving rigs you talk shortage and hope that politicians decided that "Well if people don't want to work, lets get robots to do the work" or words to that effect.

This has nothing to do with shortage of drivers, but every…

Every punter says oil prices are on the rise: Oil hits $48/bbl -- lowest since September 2016

What the hell?

How could this be, punters, advisors, investment bankers all agreed commodity prices  in general and oil prices in particular are on the rise...its a brave new era for producers and exporters -- finally the world is back and demand is going through the roof, except not so much!

What happened?  Well energy is complicated, the world operates in a balance -- 30 days of physical reserves is about all we've got (seriously) this is a just in time business.  So the long term trend always gets hit by short term variations.

Global production over the past 12 months has risen by somewhat less than 1.5% per annum.  As the world market changes production becomes less energy intensive (maybe), but the reality is that the world is growing more slowly -- America Q4 GDP growth was around 1.9% (annualized) Europe is going nowhere fast (the GDP growth in Germany is overshadowed by the lack of growth in France, Italy, Spain (lets say 27 Euro members generated a total GDP growth of 1.2…

Paying for research

This morning I was reading that CLSA -- since 2013 proudly owned by CITIC -- was shutting down its American equity research department -- 90 people will be affected!

Now the value of a lot of research is limited, that is not to say that all research is bad. In fact, I remember that GS's Asia Aerospace research was considered the bible for the sector.  Granted, there was little you could do with the research since the "buy" was for Chinese airlines...that were state owned.  Still it was a vey valuable tool in understanding the local dynamics.  It seems that the US has introduced new legislation that forces brokers to "sell" their research services!  Figures of $10,000 an hour have been mentioned...

Now, research can be sold many times; if GS has 5000/6000 clients they may sell the same research 300x or 400x (I exaggerate) but this is the key -- Those who buy the research are, I presume, prohibited from giving it away or selling it, at the same time the same rese…