Commerzbank has warned its earnings could fall this year due to businesses borrowing less and the drag on its revenue from negative interest rates, knocking its shares to a record low. David Pollard reports
The offices reach for the sky, but the profits certainly don't. And the share price of many are heading anywhere but. Commerzbank is now the latest to warn - while blaming negative interest rates. (SOUNDBITE) (English) WILSON KING INVESTMENT MANAGEMENT, HEAD OF RESEARCH, RICHARD HUNTER, SAYING: "It's starting to shake up some of the weaker European banks. Commerzbank has certainly taken a hit after its numbers, shares down over 7 per cent to an all-time low." Profits were at just over 200 million euros for the second quarter - down from just over 300 a year earlier. It came 8th from the bottom of 51 banks in the latest banking stress tests. The lender also caught in another sector-wide peril: lack of demand. (SOUNDBITE) (English) WILSON KING INVESTMENT MANAGEMENT, HEAD OF RESEARCH, RICHARD HUNTER, SAYING: "They're not necessarily finding customers, be that individual or corporate, who want to borrow. Quite apart from that, the volatility of the markets is hurting those banks which have an investment banking division. So at the moment, they are very much at the higher end of the risk spectrum." Along with Deutsche Bank. It and Credit Suisse to be ejected from the STOXX50 index of top companies after dramatic slides in their share values. This seen as another key marker of the need for new options. (SOUNDBITE) (German) BANKING EXPERT AND BAVARIAN FINANCIAL CENTER PRESIDENT, WOLFGANG GERKE, SAYING: "Not all German banks are so badly off as Deutsche Bank and Commerzbank but the sector has to change. There will have to be mergers, some branches will have to close. They must position themselves better digitally, deliver better quality. There is a lot to do." Commerzbank boss Martin Zielke is to present a new strategy later this year. Cost-cutting seen high on the agenda.