Commerzbank hit by takeover talk

FRANKFURT – Speculation about Commerzbank becoming a takeover target was rampant Tuesday in the wake of the bank’s surprise decision to cancel company pensions for the parent firm’s 24,000 employees effective the end of 2004.

“The difficult business situation has made this step necessary,” a bank spokesman said in confirming reports about the pension fund move. “The bank’s savings drive is being pushed forward.”

Commerzbank is expected to post red-ink figures for 2003 after the bank’s third-quarter asset write-downs going into the billions.

Analysts said that by lopping pension funds, Commerzbank was making itself more attractive to potential buyers.

One analyst in London who commented on condition of anonymity, told the business wire dpa-AFX that company pensions require establishing reserves which can fluctuate greatly from year to year depending on payouts due.

“This poses a risk to potential buyers,” the analyst added.

Commerzbank is the first German bank to resort to the step of stopping its company pension fund scheme, a move which banking industry analysts could pose annual savings in the range of EUR 20 to EUR 30 million.

The pension fund is a unilateral scheme paid into by the company but not by employees. Under the Commerzbank move, the current employees will be entitled to the benefits accrued up until the end of the year, but no further payments will go into the fund beyond that.

Company employee representatives meanwhile expressed their anger at the move and said they may take legal action to challenge it.

“This is a severe blow to the employees. We’re horrified,” said Werner Malkhoff, deputy employee works council chairman.

“We are examining legal steps because the management has not proven the economic necessity with figures,” he added, noting that Commerzbank’s operating results were in the black.

The move by Commerzbank so far had shown little affect on the company’s shares, which early in the afternoon were up a tiny 0.10 percent to EUR 16.10 euros.