Commerzbank has bowed to the inevitable pressure of tough market conditions and bad third quarter results by laying off almost 15% of staff in its investment banking division, Commerzbank Securities.
Last week 20 people left Commerzbank Securities, and the German bank said a further 170 out of its 1,300 investment banking staff would go by 2003. The bank will cut the total headcount by 3,400 by 2003. Commerzbank is reluctant to say it is making redundancies, and instead described the 20 who have already gone as having 'left under agreed terms'.
When Commerzbank released its quarterly results earlier this month, it managed just a negative after-tax income of €184m ($206m).
The bank said at the time that its management board was encouraged that the first effects of cost-cutting measures were felt in the third quarter, when operating costs were €20m lower than in the second quarter. However, for the whole of the first nine months, costs rose 13.4%.
Those areas particularly hit within investment banking will be equity research, sales and trading and capital markets, which includes mergers and acquisitions.
Commerzbank's equity capital markets business, which relied on floating Neuer Markt companies, has performed particularly poorly this year due to falling valuations of Neuer Markt companies, and the subsequent lack of equity offerings.
Last week's cull was the first significant round of the proposed investment banking cuts at the bank.
Earlier this year, the bank was still hiring in some parts of investment banking, including M&A.
Despite the cuts, Commerzbank is keen to point out that it is not going to withdraw from any businesses, and said it was important to maintain diversity.
The bank also said there would be investment in areas where it predicted growth, and that about 60 people would be hired to facilitate this.