Commerzbank cuts 9,600 jobs and suspends dividend as woes mount for German banks

Commerzbank plans to axe 9,600 jobs and suspend dividend payouts as a second German lender bids to shore up its business this week.

The moves are part of new Commerzbank chief executive Martin Zielke four-year restructuring plan for the lender amid a protracted period of ultra-low interest rates and weak client demand.

The partially state-owned bank will focus on corporate, small business and private clients and will merge its regional and markets operations, and scale back its investment bank.

Germany's second-largest lender said this measure would "reduce earnings volatility and regulatory risk and will free up capital to be invested in core client businesses".

The bank added that it would also suspend dividend payments "for the time being".

The bank said although it would cut 9,600 jobs, it expected to create 2,300 new posts as business picked up at the lender under its new areas of focus. It said it is expected the net loss of jobs will be 7,300.

The package of measures outlined by Zielke, who took over in May, will amount to €1.1bn ($1.2bn, £950m) in restructuring costs, adding that the group will book a €700m loss in the third quarter.

Shares at the firm have fallen by around 37% this year.

Earlier this week former German powerhouse Deutsche Bank saw its share price touch 30-year lows, sending shares lower across the European banking sector.

This follows proposals from the US Department of Justice that Deutsche Bank pays a $14bn penalty to settle allegations of mis-selling mortgage securities. Berlin is reported the be considering bailing out the bank.