CBK.DE - Commerzbank AG

Crude Slips in the U.S. With Bleak Summer Demand Outlook

(Bloomberg) -- U.S. crude futures edged lower with investors concerned that lackluster demand through the summer months will weigh on the market’s recovery.As coronavirus infections rise across much of the U.S., major fuel-consuming states including California, Florida, Arizona and Texas have reimposed stricter measures to curb the spread. Gasoline demand could fall by 17% in July from the same time last year if lockdowns are reintroduced, according to JBC Energy GmbH.Drivers across the U.S. normally hit the road for the Independence Day holiday -- usually a high point for gasoline demand during the summer -- but the virus kept more people indoors. Domestic gasoline consumption during the long weekend was more than 20% below last year’s levels, according to GasBuddy.“The coronavirus impacts in the country are causing folks to hunker back down again,” said John Kilduff, a partner at Again Capital LLC, a New York hedge fund focused on energy. “This could be a real problem for the market going forward.”While the U.S. benchmark crude has doubled in value since April to just above the $40-a-barrel mark, futures are having trouble rallying beyond that level amid uncertainty over re-openings across the country.In Florida, Miami-Dade Mayor Carlos Gimenez is planning an emergency order to close restaurants and gyms. Florida reported 206,447 Covid-19 cases on Monday, up 3.2% from a day earlier. In Texas, a county official is calling for a stay-home order once again in the Houston area.In global markets, Brent crude showed strength with demand faring better. Saudi Aramco lifted pricing for all of its crudes to Asia by $1 a barrel. Aramco also raised pricing to the U.S., where it’s reining in shipments, for a fourth month.“Brent is strengthening because of the Saudi price increase this morning and because European economies are re-opening and handling the Covid problem better than in the U.S.,” said Bob Yawger, director of the futures division at Mizuho Securities USA.Traffic congestion data -- a rough measure of automobile activity -- remains mixed, with some cities growing steadily busier and others slipping back. Of 13 world cities examined, traffic is heaviest in Shanghai and lightest in Mumbai. Congestion in Los Angeles on July 2, just before the Independence Day holiday, was 82% lower than a year ago.But in a warning sign for oil’s resurgence, the higher prices from OPEC’s largest producer come in the context of a refining industry that’s struggling to turn a profit. A refiner using Saudi Arabia’s flagship Arab Light crude in Singapore would currently make a loss with the most basic processing, according to Oil Analytics data.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  Behind Oil’s Rise Is a Historic Drop in U.S. Crude Output

  The Wall Street Journal
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  Oil Holds Near $41 With U.S. Crude Inventories Seen Shrinking

  Bloomberg

New York Private Equity Goes for the Jugular in Germany

(Bloomberg Opinion) -- Cerberus Capital Management LP has gone for the jugular. The New York private equity firm has been pushing Commerzbank AG to ramp up its cost cutting because of its dismal profit prospects and a share-price slump, and its campaign has prompted the departure of both the German lender’s chairman and its chief executive officer.However, a leadership vacuum in the midst of the worst recession in living memory isn’t ideal. While a fresh management vision will deepen Commerzbank’s restructuring plans, the search for suitable successors will delay the overhaul.Other investors, including the German government, are also eager to put the bank on a track toward sustainable profitability. But there’s a limit on how far cost reductions can help. Germany is a notoriously over-banked market, so there’s too much competition, and the country’s powerful labor unions were already opposed to the departing Commerzbank CEO’s existing job-cutting plans. First, there’s the succession to deal with. Cerberus — owner of a 5% stake in Commerzbank — wants to replace Chairman Stefan Schmittmann first, before finding a successor to CEO Martin Zielke. The bank wants to do the opposite, according to Bloomberg News, preferring the quick appointment of an internal candidate as CEO because it doesn’t want to hold things up by waiting on a new chairman. Schmittmann leaves next month and a permanent chairman may need to come from outside the bank given the lack of options on the supervisory board.That could draw out the management succession into late summer. But maybe this wouldn’t be such a terrible thing. The next couple of months should make clearer just how painful the Covid-19 recession has been for Commerzbank’s small and medium-sized company customers — the most prized part of its business. Pausing the restructuring until there’s more visibility has some merit.Letting a new chairman help choose the CEO would also allow the bank to cast a wider net. While there are several potential internal candidates to succeed Zielke, none appears to be a shoo-in. Roland Boekhout, the new head of corporate clients, is the leading internal candidate, according to Bloomberg News. His record at ING Groep NV’s German unit was impressive but he’s only been with Commerzbank since January. Another front runner, the finance director Bettina Orlopp, has been in her position since April.Zielke was in the middle of an overhaul that would have seen 7,000 more job cuts, on top of the 4,000 lined up last year. The execution of any cost reduction plan remains critical after the outgoing CEO failed to deliver on his financial targets. Labor representatives — which pushed back on Commerzbank’s merger attempt with Deutsche Bank AG last year and which control half the supervisory board — have vowed to fight the jobs plan.Commerzbank shares rose on Monday, but they still value the lender at just 22% of its tangible book, a sign of its frailty. For Cerberus, the visible results of its pressure will help show its backers that it’s not sitting idle. Zielke’s target for a 4% return on tangible equity was so unambitious that it drew criticism even from German banking regulators, so there’s no great sorrow about his departure. Worker representatives won’t be able to ignore the sense of urgency that the tumult at the top has brought to light. But, as I’ve argued before, making money in Germany’s commercial lending market while interest rates remain negative is a hard task. At some point, Commerzbank may draw fresh suitors. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  Commerzbank (CRZBY) Fined by CySEC for Market Manipulation

  Zacks
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  Cerberus Urges Orderly Process After Commerzbank CEO Ouster

  Bloomberg

Commerzbank (CRZBY) Fined by CySEC for Market Manipulation

Commerzbank (CRZBY) has been accused of manipulating the market with Cyprus Popular Bank for more than four years.

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  New York Private Equity Goes for the Jugular in Germany

  Bloomberg
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  Cerberus Urges Orderly Process After Commerzbank CEO Ouster

  Bloomberg

Cerberus wants 'orderly process' to fill Commerzbank leadership void

Cerberus, a major shareholder in Commerzbank <CBKG.DE>, said on Monday that the German bank must find a chairman before there is a formal search for a chief executive. Commerzbank's chairman and chief executive stepped down unexpectedly on Friday, bowing to demands from Cerberus that the bank change its strategy to stop a downward spiral in its financial performance. Commerzbank's shares have fallen sharply since Cerberus bought a 5% stake in 2017, when it became the bank's second-largest shareholder after the German government.

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  New York Private Equity Goes for the Jugular in Germany

  Bloomberg
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  Commerzbank (CRZBY) Fined by CySEC for Market Manipulation

  Zacks

Cerberus Urges Orderly Process After Commerzbank CEO Ouster

(Bloomberg) -- Cerberus Capital Management called for an “orderly process” to replace the chairman and chief executive officer of Commerzbank AG, who were both ousted in a shareholder revolt led by the U.S. buyout firm.The firm -- a longtime Commerzbank investor which has became more activist in recent weeks -- signaled that a new chairman to replace Stefan Schmittmann should be appointed first, followed by a formal process to find a successor for CEO Martin Zielke, according to a statement late Sunday.Zielke offered his resignation to the supervisory board on Friday evening as he took responsibility for a slump in the lender’s share price, which has fallen by about half during his four-year tenure. Schmittmann said he’d step down next month. The moves followed a bruising campaign by Cerberus -- in which it had pushed for board seats -- and private expressions of dissatisfaction by the German government, the bank’s biggest shareholder.We “are surprised by this development, as we had expected current management to continue and to become more aggressive on cost takeout,” Citigroup Inc. analysts led by Nicholas Herman wrote in a note on Monday. “We struggle to identify a long list of internal candidates.”Shares of Commerzbank rose 4.2% at 9:01 a.m. in Frankfurt trading.Roland Boekhout, the bank’s head of corporate clients, is emerging as the internal favorite to replace Zielke, people familiar with the matter said, asking not to be identified because the information is private. The bank is also vetting finance chief Bettina Orlopp, the people said.Board member Nicholas Teller could take over from Schmittmann at least on a temporary basis, the people said. Deputy Chairman Uwe Tschaege, who’s a labor representative, will automatically assume the position if no one has been chosen by the time Schmittmann departs.Commerzbank’s supervisory board may seek clarity as soon as possible and decide on replacements for the vacant positions as early as Wednesday, a person familiar with the matter said, cautioning that the committee could also choose to postpone a vote, and instead seek to line up additional external candidates.“The sudden departure of Commerzbank’s chairman and chief executive calls for an orderly process of filling the vacant positions. First, a new chairman has to be found, followed by a formal process to find a successor for the CEO, to be executed by the supervisory board,” a Cerberus representative said in an emailed statement.Sweeping RestructuringA court will appoint a new supervisory board member to fill the vacancy once Schmittmann leaves, the chairman said according to the transcript of a internal video message seen by Bloomberg. The supervisory board will appoint a new chairman once that new member has joined, Schmittmann also said.A spokesperson for Commerzbank declined to comment.Before the surprise announcement Friday, the lender was working on a sweeping restructuring program including possibly more than 7,000 job cuts, on top of 4,000 or so announced last year. It’s unclear what will happen to this plan now that top management has resigned.Unlike Cerberus, the bank’s leadership is leaning toward a quick succession plan, which precludes external candidates, because it would avoid having to wait for a new chairman. Appointing an existing management-board member as the next CEO would also make it easier for that person to take ownership of the major overhaul that’s being planned.Outside PerspectiveBoekhout currently has the best chance of getting the CEO job because he only joined Commerzbank at the beginning of this year, and therefore is seen as having more of an outside perspective, the people said. While 50-year-old Orlopp joined in 2014, the remaining management board members have been with the lender for more than a decade.The German government and Cerberus want a CEO with a proven capability of implementing stringent cost cuts, because they see Zielke’s failure to do that as his biggest deficiency, the people said. They also want a chairman who has a better grasp of digitalization than Schmittmann, they said.Boekhout’s tenure at ING Groep NV’s German unit was widely seen as a success after he more than doubled pretax profit during his eight years in charge.Orlopp is known for improving Commerzbank’s control systems when she was head of compliance before taking on her new role earlier this year. She’s currently spearheading the bank’s cost-cutting program.(Updates with share reaction in fifth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  New York Private Equity Goes for the Jugular in Germany

  Bloomberg
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  Commerzbank (CRZBY) Fined by CySEC for Market Manipulation

  Zacks

German union in show of strength as Commerzbank's top duo exit

Commerzbank's chief executive and chairman were under pressure from activist investors to axe jobs, but they decided to go first after a damaging clash with unions last week, sources close to the situation told Reuters. With nearly 12,000 jobs at stake, a quarter of the Commerzbank workforce, divisions came to a head when labour representatives blocked a supervisory board meeting to discuss the future of Germany's second largest bank. Although precipitated by a public campaign for change by U.S. activist investor Cerberus, one of its top shareholders, the sudden resignations of both CEO Martin Zielke and chairman Stefan Schmittmann came as a shock.

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  New York Private Equity Goes for the Jugular in Germany

  Bloomberg
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  Commerzbank (CRZBY) Fined by CySEC for Market Manipulation

  Zacks

German union in show of strength as Commerzbank's top duo exits

Commerzbank's <CBKG.DE> chief executive and chairman were under pressure from activist investors to axe jobs, but they decided to go first after a damaging clash with unions last week, sources close to the situation told Reuters. With nearly 12,000 jobs at stake, a quarter of the Commerzbank workforce, divisions came to a head when labour representatives blocked a supervisory board meeting to discuss the future of Germany's second largest bank. Although precipitated by a public campaign for change by U.S. activist investor Cerberus, one of its top shareholders, the sudden resignations of both CEO Martin Zielke and chairman Stefan Schmittmann came as a shock.

Commerzbank fined 650,000 euros for deals with defunct Cypriot bank

The country's CySEC commission said Commerzbank had been sanctioned over investment operations conducted by the now-defunct Laiki - also known as Cyprus Popular Bank - in 2011, following Laiki's merger with Greece's Marfin-Egnatia Bank. Commerzbank declined to comment on the case, which followed an eight-year probe by Cypriot authorities.

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  Commerzbank (CRZBY) Fined by CySEC for Market Manipulation

  Zacks
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  German union in show of strength as Commerzbank's top duo exit

  Reuters

Commerzbank Leaders Toppled in Cerberus-Led Investor Revolt

(Bloomberg) -- Commerzbank AG’s leadership was toppled in a shareholder revolt led by Cerberus Capital Management after failing to turn around a lender that’s struggled since its bailout in the financial crisis.Chief Executive Officer Martin Zielke, in the job for just over four years, has offered to resign, though the bank’s supervisory board still has to accept his resignation and set a date, Commerzbank said late Friday. Chairman Stefan Schmittmann will leave Aug. 3.“The bank needs a profound transformation and a new CEO, who will get the necessary time from the markets to implement a strategy,” Zielke said in the statement. “Even if we made strategic progress, the financial performance of the bank has been and is unsatisfactory. And as CEO I bear the responsibility for that.”Cerberus, which unsuccessfully pushed for two board seats, has led an investor revolt at Commerzbank, criticizing the supervisory board and management for being too timid in cutting costs. But the resignation of both the chairman and the CEO suggests that the German government -- the bank’s largest shareholder -- has also lost patience.Zielke, a former retail banker who took over in May of 2016, is the architect of a pivot away from investment banking and toward lending to private and corporate clients in the bank’s home market. He drove an aggressive expansion of the client base, betting that rising interest rate would make that business profitable again.When expectations for higher rates didn’t materialize, he struggled to translate customer growth into higher profitability. New targets that he presented last year were widely seen as unambitious, prompting Cerberus to take a more activist approach to its stake in Commerzbank.The German government also grew increasingly dissatisfied with Commerzbank’s share price performance under Zielke and commissioned consultancy firm Boston Consulting Group last year to make suggestions for how to reshape it. BCG -- in a report earlier this year -- urged Zielke to increase his cost savings target by as much as the factor of three, Bloomberg has reported.Shares of the lender have lost about half of their value since Zielke took over.This year, Zielke has been working on another update to his strategy, including possibly more than 7,000 job cuts, branch closures and a scaling back of its international operation, Bloomberg has reported. He was expected to present the new strategy to the board next week.While investors pushed for more radical cost reductions, labor representatives vowed to “vehemently” fight job cuts until after the bank’s digital transformation is complete.The announcement on late Friday came before Zielke was expected to present plans for trimming the bank’s international operations as part of a presentation to the board. Management had initially planned to present its plan to the board this week, but the meeting was postponed because labor representatives complained they hadn’t been briefed sufficiently before.(Adds Zielke quote in third paragraph, details on government stance in seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  New York Private Equity Goes for the Jugular in Germany

  Bloomberg
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  Commerzbank (CRZBY) Fined by CySEC for Market Manipulation

  Zacks

Gold Heads for Biggest Quarterly Gain Since 2016 on Virus Woes

(Bloomberg) -- Gold headed for the biggest quarterly advance since 2016 amid a surge in demand for haven assets due to the coronavirus outbreak, which shows no signs of abating.Bullion has been rising due to a resurgence in virus infections, with new hot spots emerging and the World Health Organization warning that the worst of the pandemic is still to come because of a lack of global solidarity. More U.S. areas took steps to scale back reopenings, while Australia’s Victoria is imposing a four-week lockdown in some parts of the metropolis of Melbourne in an attempt to contain a spike in cases.There’s also increased geopolitical tension after China’s top legislative body approved a landmark national security law for Hong Kong, a sweeping attempt to quell dissent that risks U.S. retaliation and the city’s appeal as a financial hub. Meanwhile, the Trump administration earlier said it was suspending regulations allowing special treatment to Hong Kong over things including export license exceptions.The precious metal has rallied 17% this year as the health crisis prompted a wave of stimulus from governments and central banks as they tried to minimize the damage to the global economy. Investors also continue to pile into gold-backed exchange-traded funds, with holdings at a record.“Low interest rates, monetary policies and the coronavirus are all at play,” said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “The $1,800 level is a psychological hurdle. At current prices we see gold pushing the boundaries of what our model implies as fair value, so we may need a larger collapse in Treasury rates to push gold past the $1,800 level.”Spot gold was little changed at $1,770.36 an ounce at 12:07 p.m. in London as the dollar climbed. Prices are up 12% in the three months ending June 30, and are set to cap seven straight quarters of gains, the longest such stretch since 2011.The $1,800 mark “is not far away so it can happen quickly,” said Commerzbank AG analyst Carsten Fritsch. “But further beyond will be more difficult.”Investors will be closely watching comments from Federal Reserve Chair Jerome Powell due later Tuesday. In remarks prepared for testimony before the House Financial Services Committee, Powell stressed the importance of keeping the coronavirus contagion contained as the U.S. economy bounces back from its deepest contraction in decades.(An earlier version corrected level in 2nd deck headline.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  Digital Realty Develops Second Data Center in Hong Kong

  Zacks
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  Hong Kong's First Lesbian Pop Star Is Also One Of Its Outspoken Political Activists

  HuffPost

Cerberus wants well over 7,000 Commerzbank job cuts - source

Cerberus wants Commerzbank <CBKG.DE> to cut far more than a reported 7,000 jobs as part of plans by Germany's second biggest bank to reduce costs, a person familiar with the matter said. The U.S. activist investor, one of Commerzbank's largest shareholders with a stake of more than 5%, has been pressing for big changes, with a dramatic restructuring a concern for German banking unions. Cerberus plans to present Commerzbank with a "succinct view" on measures it should take on headcount and other moves in the coming weeks, the person said on condition of anonymity, adding that job cuts should be "definitely beyond" 7,000.

Commerzbank (CRZBY) Mulling Massive Job Cuts to Control Costs

Commerzbank (CRZBY) plans job cuts and branch closures to address shareholders' criticism of ineffective cost-cutting measures.

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  Commerzbank chairman and CEO bow out to give lender a fresh start

  Reuters
• CEO of ailing Commerzbank offers to resign, chairman quits

  Associated Press

Wirecard Vows to Continue With Activities Amid Insolvency Steps

(Bloomberg) -- Wirecard AG expects its provisional insolvency administrator to be appointed shortly as the scandal-hit payment company said its business activities will continue.Once lauded as one of Germany’s most successful up-and-coming businesses, Wirecard filed for insolvency on Thursday after the company said that 1.9 billion euros ($2.1 billion) previously reported as cash on its balance sheet probably doesn’t exist.In a statement on Saturday, the company said its management board believes continuation of operations “is in the best interests of the creditors.” That includes its banking unit, which is currently not part of the insolvency proceedings.“The electronic funds transfer of Wirecard Bank are not affected,” the company said in the statement. “Payouts to merchants of Wirecard Bank will continue to be executed without restrictions.”Wirecard said on Thursday it’s ceding control of funds at its banking unit after Germany’s financial regulator stepped in to prevent the money from being deployed elsewhere at the company. Wirecard Bank AG is not part of that process and BaFin -- as the watchdog is known -- has appointed a special representative for the unit.How German Fintech Darling Wirecard Fell From Grace: QuickTakeThe fallout from the company’s shocking collapse reverberated over the weekend after Germany’s state-owned development bank KfW said it’s facing potential losses of 100 million euros from a credit line that its unit granted the company in September 2018.Other banks are on the hook for about 1.6 billion euros in loans, people familiar with the matter have said. The group of more than a dozen lenders led by ABN Amro Bank NV, Commerzbank AG and ING Groep NV were in negotiations with Wirecard aimed at keeping it afloat and were surprised by the insolvency filing, Bloomberg has reported.Despite claims to continue with business as usual, digital bank Curve temporarily froze services, Financial News reported on Friday, citing a company spokesperson. Curve is one of a number of U.K.-based fintech firms that relied on Wirecard’s services.Also on Friday Financial Conduct Authority, the U.K.’s financial markets regulator, imposed a number of requirements including that it must not dispose of any assets or funds. Wirecard is not supervised by the FCA.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  SoftBank Looking To End Partnership With Wirecard After $2.1B Went Missing

  Benzinga
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  Who's to blame for Wirecard? Germany passes the buck

  Reuters

Commerzbank board to decide on cost-cutting plan next week, report says

Commerzbank's <CBKG.DE> board will likely approve more branch closures and job cuts at an extraordinary meeting next week, a German newspaper reported on Saturday. Commerzbank, which last year announced plans to cut thousands of jobs, has said it is in the process of identifying more cost cuts and will announce plans when it releases second quarter earnings in August at the latest. Boersen Zeitung said the supervisory board will decide on job cuts and branch closures during a special meeting on Wednesday.

Commerzbank board to decide on cost-cutting plan next week -report

Commerzbank's board will likely approve more branch closures and job cuts at an extraordinary meeting next week, a German newspaper reported on Saturday. Commerzbank, which last year announced plans to cut thousands of jobs, has said it is in the process of identifying more cost cuts and will announce plans when it releases second quarter earnings in August at the latest. Boersen Zeitung said the supervisory board will decide on job cuts and branch closures during a special meeting on Wednesday.

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  Virgin Money restarts job cuts and branch closures after coronavirus pause

  Reuters
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  Virgin Money to go ahead with job cuts and branch closures

  Evening Standard

Wirecard Fights for Survival as Billions May Not Exist

(Bloomberg) -- Wirecard AG was left fighting for survival after acknowledging that 1.9 billion euros ($2.1 billion) that it had reported as assets probably don’t exist, deepening an accounting scandal that has rattled Germany’s financial industry.The payments processor said it’s in discussions with creditors and considering a full-scale restructuring after pulling its financial results for fiscal 2019 and the first quarter of 2020. Previous descriptions of its business with third parties, which process transactions on Wirecard’s behalf, were “not correct.”Even before the early Monday statement, the unfolding scandal had seen Wirecard’s shares and bonds collapse, its chief executive depart, and left the company renegotiating debt terms with its lenders. In less than a week, the fintech once hyped as the future of German finance has lost almost 90% of its market value, with the shares slumping for a third trading day on Monday.“It’s a complete disaster we’re looking at,” said Felix Hufeld, head of BaFin, Germany’s top financial regulator, at a panel discussion Monday. “It’s a shame that something like that happened.”Wirecard said it was in “constructive discussions” with its lending banks, including the extension of lines coming due at the end of June. It is working with investment bank Houlihan Lokey on a sustainable financing strategy. Also under consideration are cost reductions, a restructuring, and disposal or termination of business units and product segments, according to the statement.“There is a prevailing likelihood that the bank trust account balances in the amount of 1.9 billion euros do not exist,” Wirecard said. The firm had repeatedly delayed announcing its financial statements, and last week warned that loans of as much as 2 billion euros could be terminated if its audited annual report wasn’t published by June 19.Cracks are already appearing among Wirecard’s lenders. Bank of China Ltd. may write off most of the 80 million euros ($90 million) it’s owed and not extend its credit line, according to people familiar with the situation.Moody’s Investors Service decided on Monday to withdraw Wirecard’s credit ratings because it “believes it has insufficient or otherwise inadequate information to support the maintenance of the ratings.” It had already cut the ratings six levels on Friday, putting it one step from the lowest tier of junk.Read more on how Wirecard became an embarrassment for GermanyWirecard fell as much as 50% and traded 38% lower at 12:35 p.m. in Frankfurt. The stock has lost 85% since Wednesday, the day before it revealed that the funds were missing.Wirecard’s lenders are demanding more clarity from the company in return for the extension of almost $2 billion in financing after it breached terms on the loan, people familiar with the matter said earlier. At least 15 commercial lenders, including Commerzbank AG and ABN Amro, are in hectic negotiations about the steps to take, they said.The missing cash “could trigger an event of default and allow creditors to withdraw lines of credit,” said Justin Tang, head of Asian research at United First Partners in Singapore.Wirecard has an outstanding revolving credit facility of 1.75 billion euros, according to data compiled by Bloomberg. About 90% of the RCF has been drawn by the company, according to people familiar with the matter and a list detailing the facility’s participation that was seen by Bloomberg:It’s unclear how the latest admissions will affect discussions with the banks. Most are leaning toward an extension of the repayment obligation in order to better assess the potential impact of a default on their balance sheets, one of the people said. However, a prolonged extension could be seen as delaying an insolvency, which is illegal under German law.The scandal has prompted the resignation of Markus Braun after almost two decades as CEO. He was replaced on an interim basis by James Freis. Braun is unwinding a large portion of the shares he owns in the company, a stake he financed by borrowing against the stock’s value, Bloomberg has reported.Read more on how Braun has to unwind pledged sharesThe deepening mystery over the lost money centered on two Philippine lenders, after Wirecard said a couple of unnamed Asian banks had been unable to find accounts with the cash.Both the Bank of the Philippine Islands and BDO Unibank Inc. said Wirecard wasn’t a client and they hadn’t seen the money. None of the missing cash entered the Philippine financial system, according to the nation’s central bank, which is conducting its own investigation.A document purporting to show a link between Wirecard and BPI was “bogus” and may be part of an attempted fraud, the bank’s President Cezar Consing said Friday. BDO Unibank CEO Nestor Tan said it was a matter of “document fraud which was subsequently clarified by the bank as spurious.”Wirecard is continuing to investigate the matter and can’t rule out potential effects on the financial accounts of previous years, it said in Monday’s statement.(Updated with ninth paragraph, new table.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

New Wirecard CEO Has Few Days to Calm Nervous Investors

(Bloomberg) -- James Freis took charge of Wirecard AG on Friday following the shock announcement that Markus Braun had resigned as chief executive officer. The question he faces on Monday is what, if anything, he will be able to salvage of the payment company.Braun’s position became untenable following revelations that about 1.9 billion euros ($2.1 billion) -- or two-thirds of the company’s 2019 revenue -- had gone missing. The two Asian banks that were supposed to be holding the money denied any business relationship with Wirecard and the company subsequently withdrew its fiscal 2019 and first-quarter 2020 financial results after saying those funds on its balance sheet probably don’t exist.The chaos has shaved about 85% off Wirecard’s market value over just three trading days. As interim CEO, Freis has to convince investors that the collapse isn’t terminal.He has some relevant experience. He began his career as an attorney at the Federal Reserve Bank of New York. After a spell as director of the U.S. Treasury Department’s Financial Crimes Enforcement Network, where he was responsible for the regulation of financial institutions, he spent 6 years at Deutsche Boerse AG, most recently as chief compliance officer.Freis wasn’t meant to start at Wirecard until July. He also wasn’t meant to be running the company -- last week, he was supposed to be getting ready to run a new department called “Integrity, Legal and Compliance.” Now, his first priority will be to work closely with the company’s lenders, who are demanding more clarity in return for the extension of almost $2 billion in financing after Wirecard breached terms on the loan. At least 15 commercial lenders, including Commerzbank AG and ABN Amro, are in negotiations about the next steps.Wirecard said it’s in “constructive talks” with its lenders, and has hired investment bank Houlihan Lokey Inc. to come up with a financing strategy. However, a prolonged extension of Wirecard’s repayment obligation could be seen as delaying insolvency, which is illegal under German law.In Braun’s parting note on Friday he said the “confidence of the capital market in the company I have been managing for 18 years has been deeply shaken.” He added that responsibility for all business transactions lies with the CEO.Now Freis will need to build up that confidence to halt a share price that went into free fall -- the stock was down 36% at 10:58 a.m. in Frankfurt trading. Long-term investors have cut their stakes in Wirecard, while Deutsche Bank AG’s asset manager DWS said it will file a lawsuit against both Wirecard and Braun, a company spokesman said on Friday.The price of credit swaps on Wirecard indicate 82% odds of default by Christmas and 96% likelihood over five years, according to ICE Data Services on Friday, while Moody’s Investors Service cut Wirecard’s credit ratings six levels, putting it one step from the lowest tier of junk.Wirecard is also facing multiple investigations by local prosecutors and BaFin, the German financial regulator. One of Freis’ tasks will be to clarify with regulators what happened to the missing cash and what the implications will be to Wirecard’s balance sheet.The problem has been compounded after Philippine central bank Governor Benjamin Diokno told reporters on Sunday that none of the missing money entered the Philippine financial system, after two of its major lenders denied holding funds for the German payments processor.The company has also been forced to reassure customers that it is business as normal at its banking arm. Wirecard started offering a digital wallet called boon Planet in 2019. The app, similar to Paypal, was advertised in January this year with an attractive yield for account balances. While it is unclear how much money customers deposited at the app, the company sent out a message on Saturday reassuring its clients that their deposits are protected by a German state guarantee fund.German politicians are now taking aim at Wirecard, once seen as proof that Germany could build a fintech giant to take on U.S. rivals.“BaFin started its investigations early on, but sadly that couldn’t prevent the striking losses for investors,” said Florian Toncar, a German lawmaker from the opposition Free Democrats. “It would be very good to see BaFin use the tools at its disposal to quickly provide investors with clarity.”Freis posted his job update on LinkedIn shortly after the announcement. One contact responded that it sounds like “one heck of a turn around project” but that Wirecard has found the right guy to restore credibility. In a reply, Freis quipped that the “one upside...is that I never have to worry about finding a beer when I need one at the end of the day.”(Updates with share price in eighth paragraph, additional context.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

Germany’s Fintech Star Falls After Missing Billions at Wirecard

(Bloomberg) -- Just a month ago, the chief executive officer of Wirecard AG boasted on Twitter that the future would still be bright for the digital payments company when “all the noise and dust settles.”At the time, Markus Braun was a paper billionaire. But over the course of a couple of days, the fintech veteran has been forced to step-down as CEO and seen the value of his stake dwindle after a two-day stock rout.Braun’s position at the German payments company became untenable after revelations on Thursday that about 1.9 billion euros ($2.1 billion) -- two-thirds of 2019 revenue and about a quarter of the firm’s consolidated balance sheet -- had gone missing. Two Asian banks that were supposed to be holding the money it denied any business relationship with Wirecard, raising fresh questions about the embattled company.After years of allegations of wrongdoing, Bruan was at the center of the controversy, with repeated assurances that Wirecard’s accounts were above the board, despite Wirecard headquarters being searched in early June by German prosecutors as part of a criminal probe involving the company’s senior management.The executive, who’s also the company’s largest shareholder, will now be replaced on an interim basis by James Freis, who was originally appointed in May to take the new role of chief compliance officer.Freis is stepping into an almost unprecedented situation. The interim CEO wasn’t supposed to join until July, when he was going to be responsible for a newly created department called “Integrity, Legal and Compliance.”Previously head of compliance at Deutsche Boerse AG, Fries held the position of director of the U.S. Treasury Department’s Financial Crimes Enforcement Network, where he was responsible for the regulation of financial institutions.He will need to act fast to restore trust and reassure creditors. Failure to publish audited results on Friday triggers the potential termination of up to 2 billion euros in loans. Wirecard said it is in “constructive” talks with its banks to continue credit lines and the further business relationship.“A change in management was warranted for some time and following yesterday’s events and the further decline in Wirecard shares today, we are not surprised that the CEO is stepping down,” said Sanjay Sakhrani, an analyst with Keefe, Bruyette & Woods. “There may be no quick fix.”The story of Wirecard’s woes trace back to Braun, who may have been too invested in the company, making him either unwilling or unable to see issues and take corrective measures.When Braun joined Wirecard in 2002, the payments company had a few dozen employees and in its early years serviced mainly clients active in online gambling and porn. The Austrian national since engineered a growth story by acquiring companies in the U.S. and Asia. Today, customers include Germany’s most successful soccer club Bayern Munich, French mobile phone carrier Orange SA and Swedish furniture giant Ikea.In September 2018, Wirecard replaced Commerzbank AG in Germany’s elite DAX index, making Braun a star of the country’s digital ambitions.“Markus Braun’s resignation was overdue,” said Danyal Bayaz, a lawmaker with Germany’s Greens. “Wirecard is not a small fintech, but a DAX member.”Unlike U.S. tech billionaires, Braun usually sports a suit instead of a hoodie, but generally shuns wearing a tie. He got a degree in computer science from the Technical University of Vienna and a doctorate in social and economic sciences. He worked as a management consultant at KPMG before joining Wirecard.Even after winning SoftBank Group Corp. as an investor in April last year, Braun had been unable to re-establish trust following a series of articles in early 2019 by the Financial Times about potential fraud. Despite aggressive denials and allegations of market manipulation leveled at the reporter, the company acknowledged irregularities following an independent investigation that had access only to limited information.Braun’s response to the latest crisis followed a similar pattern: downplay or dismiss the allegations, paint the company as a victim and attempt to switch over to business as usual.At 8:19 a.m. on Thursday -- a time when investors were nervously awaiting delayed 2019 financial results -- Wirecard posted on Twitter about how Chinese shopping trends were favoring its business model, sparking enraged comments as the stock collapse took shape hours later.The company was well aware of the issue at the time of the feel-good tweet. Chief Operating Officer Jan Marsalek, who has been temporarily suspended, had tried to get in touch with the two Asian banks and trustees over the past two days to recover the missing money, according to a person familiar with the matter.In the direct aftermath, Braun pointed the finger at everyone but himself.“It is currently unclear whether fraudulent transactions to the detriment of Wirecard AG have occurred,” he said in a statement on Thursday, adding that the company will file a complaint against unnamed persons. “It cannot be ruled out that Wirecard has been the victim in a substantial case of fraud,” he said later.Long-term investors criticized Braun for being too much of a “techie” -- big on vision but short on management expertise. They’ve noted that he was very loyal to employees and resisted firing people. Those characteristics could have made him too trusting to delve into compliance issues as many in charge of those areas have long histories with the CEO.Center stage is not where Braun says he’s comfortable. The computer scientist steers Wirecard from a suburban office park, a world away from the glittering urban towers that house most financial powerhouses. He calls himself shy -- his birthdate isn’t publicly known and the company only acknowledges him being born in Vienna in 1969 -- but there’s more than a hint of false modesty.He aggressively pushed the company’s expansion, executing numerous takeovers of smaller and at times intransparent operators. And he wasn’t bashful about trumping up Wirecard’s success.“It can make you stronger and more robust if you focus on the positive and manage to make something positive from negative energy,” he told Bloomberg in an interview in September 2018 with the company at its peak. “Whenever you stick your head out, some people will like it and some won’t.”A year later at banking conference in Frankfurt, the bravado was still there despite months of turmoil over accounting concerns. Sitting on stage alongside, his counterpart at Deutsche Bank AG -- a lynch pin of the German economy and a company will versed in crises -- the moderator asked both men what it meant that Wirecard’s share price was above Deutsch Bank’s, Braun replied: “It means we are both undervalued.”(Updated with additional context.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

Wirecard Suspends Executive After $2.1 Billion Goes Missing

(Bloomberg) -- Wirecard AG has temporarily suspended its outgoing chief operating officer after revealing that auditors couldn’t find about 1.9 billion euros ($2.1 billion) in cash, spooking investors and casting doubt on the company’s leadership and survival.Jan Marsalek has been suspended on a revocable basis until June 30, the company said in a statement on Thursday. James Freis, who had already been tapped to lead the company’s new “integrity, legal and compliance” department starting next month, will begin in his role immediately. Marsalek was due to step down from the COO role to a new position in charge of business development, Wirecard said in May.The company suffered one of the worst stock slumps in the history of Germany’s benchmark index on Thursday after revealing that auditors had been unable to find billions of cash that was supposed to be held in Asian banks. The company warned loans of as much as 2 billion euros could be terminated if its audited annual report, delayed for the fourth time, was not published by Friday.Marsalek had tried to get in touch with the two Asian banks and trustees over the past two days to recover the missing money, but wasn’t successful, according to a person familiar with the matter. It’s unclear if the funds can be recovered, the person added. Marsalek couldn’t immediately be reached for comment.Ernst & Young was unable to confirm the location of the cash in certain trust accounts, and there was evidence that “spurious balance confirmations” had been provided, Wirecard said in a statement on Thursday. That’s about a quarter of the consolidated balance sheet total, the company said.“We are stunned,” said Ingo Speich, a fund manager at Deka Investments, a top 10 shareholder at the firm. “A new start in terms of personnel is more urgent than ever.”The escalating crisis also calls into doubt the future of Chief Executive Officer Markus Braun. The executive, also the company’s biggest shareholder, has been at the helm since 2002, building the company from a startup into a payment provider whose technology facilitates transactions around the world.Braun painted the company as a potential victim in a separate statement. The CEO has been resisting calls to resign and aggressively defending the company against accusations of accounting fraud, led by a series of articles in the Financial Times.“It is currently unclear whether fraudulent transactions to the detriment of Wirecard AG have occurred,” said Braun, adding that the company will file a complaint against unnamed persons.In another statement published overnight, Braun said the trustee involved is in “constant contact” with EY and Wirecard and has promised to clear up the issue quickly with the two banks.“It cannot be ruled out that Wirecard has been the victim in a substantial case of fraud,” Braun said.The stock dropped as much as 71% to 29.90 euros in Frankfurt on Thursday, one of the biggest falls on record and the largest for a member of Germany’s prestigious 30-company DAX stock index. It later recovered somewhat to 39.90 euros, a decline of 62%. Wirecard’s bonds suffered a record plunge.Loan IssueWirecard warned loans up to 2 billion euros could be terminated if its audited annual report was not published by June 19. Analysts at Morgan Stanley estimated that Wirecard has available cash of around 220 million euros, if it cannot locate the missing $2.1 billion.“While we would expect Wirecard to seek covenant waivers, if the banks call 2 billion-euros of debt and that is mostly drawn, then we expect investor focus to turn to the balance sheet and liquidity,” said analysts at Morgan Stanley in a note on Thursday.Wolfgang Donie, analyst at NordLB, warned that the “overall situation at Wirecard can only be described as insupportable and the scandal is now becoming a crisis that is threatening the existence of the company.”German financial markets regulator BaFin said it is examining Wirecard’s disclosure on Thursday as part of its investigation into whether the company violated rules against market manipulation, according to a spokeswoman.In September 2018, Wirecard reached a market valuation of 24.6 billion euros, replacing Commerzbank AG in the DAX alongside titans such as Volkswagen AG, Siemens AG, and Deutsche Bank AG. Following Thursday’s collapse, the company is valued at around 6.7 billion euros.“Wirecard’s retreat could be terminal,” said Neil Campling, an analyst at Mirabaud Securities.EY told Wirecard that their results will require additional audits after two unnamed Asian banks that have been managing the company’s escrow were unable to find accounts with about 1.9 billion euros in funds, Wirecard said in an additional statement. Those funds had been set aside for risk management, the company said.Headquarters SearchedWirecard said last month that the latest delay in publishing results was due to EY needing more time to finish its review, and that the auditor hadn’t found anything material within the scope of its work. Wirecard had previously postponed the results while it was working with KPMG on a probe into allegations about accounting irregularities.Braun has aggressively fought against allegations that the company’s financials have been mismanaged. Braun has also resisted calls from activist investors TCI Fund Management Ltd. to step down, promising to regain investor confidence and improve compliance and control.Wirecard headquarters were searched in May by German prosecutors as part of a probe involving the company’s senior management.Wirecard said in February that full-year revenue rose about 38% to 2.8 billion euros while earnings before interest, taxes, depreciation and amortization jumped 40% to 785 million euros.(Updates with Braun statement from 10th paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

Wirecard and Germany Both Shot the Messenger

(Bloomberg Opinion) -- Less than a month ago, Wirecard AG told investors that it expected an “unqualified audit opinion” when its long-delayed annual results were finally published. The update that the German electronic-payments processor provided to the market on Thursday was about as far from unqualified as it’s possible to imagine.Auditor Ernst & Young has been unable to obtain enough information to verify 1.9 billion euros ($2.1 billion) of the company’s cash balances, according to the Wirecard statement. Furthermore, there’s evidence that a third party tried to “deceive” the auditor. The annual report still hasn’t been published and, unless that’s quickly resolved, creditors might terminate 2 billion euros of loans to the company. The shares lost about two-thirds of their already beaten-down value. Since their peak in 2018, when Wirecard replaced Commerzbank AG in Germany’s blue-chip Dax index, about 20 billion euros of shareholder wealth has gone up in smoke. The market capitalization is now just 4.4 billion euros.These events cap a devastating fall from a grace for a business that investors hoped would repair Germany’s reputation for being a laggard in IT and technology, and restore the pride of its diminished finance sector. The Wirecard case is also a lesson in the dangers of group think: Financial analysts, directors, regulators and auditors were for too long unwilling to listen to important questions about how it made money.The company has for months been engaged in a war of words with the Financial Times newspaper and short sellers, who queried its accounting practices and the role of third parties used by Wirecard in countries where it lacked a license to operate.For outsiders not privy to internal documents, the complexity and opacity of Wirecard’s business made it difficult to pass judgment. Nevertheless, the FT’s reporting raised sufficient doubts to warrant further investigation. Police in Singapore launched a probe.   And yet, German prosecutors chose to investigate an FT journalist, and Wirecard’s regulator Bafin temporarily banned investors from shorting the stock last year. Instead of demonstrating diligence, Germany tried to shoot the messenger.   Analysts were also too willing to take the company at its word. Mirabaud Securities’ Neil Campling was a rare voice that doubted Wirecard’s business and technology. In contrast, another analyst accused the FT of publishing “fake news” (the bank where they worked subsequently backtracked). Another said they hadn’t read the full conclusions of a recent special audit by KPMG because they were in German. Before today, Ernst & Young had signed off on Wirecard’s accounting for more than a decade.When a stock is heavily shorted, as Wirecard’s was, it’s incumbent on directors to ask why. But in this case, the board appears to have been in thrall to the chief executive officer, Markus Braun, who has defied calls from some investors to resign. He said on Thursday that it was still unclear whether fraudulent transactions had occurred.  The company’s defenses began to unravel last month when KPMG was unable to verify sales and profits booked via third-party partners. Wirecard’s apparent mischaracterization of those findings appears to have spurred German regulators into action. Its offices were raided earlier this month.Trust and the appearance of propriety are vitally important for the payments industry, and after today Wirecard is now severely lacking in both. The FT journalist who pursued the story endured personal attacks on social media, but his instincts appear to have been correct. For years Germany took a lenient approach to regulating its banks and suffered the consequences. It has made the same mistake with a fintech.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Bryant is a Bloomberg Opinion columnist covering industrial companies. He previously worked for the Financial Times.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

A New York Bet on German Banks Turns Very Sour

(Bloomberg Opinion) -- Cerberus Capital Management LP has given up on the art of persuasion. After losing $900 million on stakes in Deutsche Bank AG and its smaller rival Commerzbank AG — about half of its original 2017 investments — the New York private equity firm has come out fighting. That Cerberus is turning from backer to shareholder activist says more about its miscalculations on German banking than its aspirations.Cerberus, run by the low-profile billionaire Stephen Feinberg, has vowed to seek “alternative paths” after Commerzbank rejected its request last week to give it two seats on the company’s supervisory board. In a punchy response, Cerberus said it remained committed to “achieving substantial change to the leadership,” and that management had failed to meet targets that weren’t ambitious enough to begin with.Commerzbank held its annual shareholder meeting just last month, so pushing for a seat at the table would mean Cerberus getting a German court to enforce an extraordinary general meeting, while winning over other investors to nominate the new candidates.The German bank is indeed in an “exceptionally difficult and vulnerable position,” as Cerberus points out. The pandemic struck just as it was starting to work through its latest restructuring. The shares have rebounded from a May low but they still value the lender at just 20% of its tangible book, hardly a sign of strength. In the European benchmark bank index, only an Italian and a Spanish bank — whose governments have a fraction of the firepower of Germany to support the economy through the pandemic — trade at similar lows.The frustration is understandable. Commerzbank’s chief executive officer, Martin Zielke, hasn’t exactly aimed for the stars and his execution has been slow. He has targeted a paltry return on tangible equity of 4% from cutting branches and some jobs. Deutsche Bank, in the middle of its biggest overhaul in decades, aims for 8% (although it’s questionable whether that’s achievable).Cerberus isn’t alone in wanting deeper and faster cuts. At least two more large Commerzbank investors agree, Bloomberg News has reported. And the German government, which still owns 16% of the lender after its crisis-era bailout, replaced its two supervisory board members in May because of similar concerns.However, Commerzbank’s management isn’t entirely to blame for Cerberus’s losses — even if the investment firm feels its advice fell on deaf ears in the 70 meetings it says it held with the company. The U.S. fund’s endorsement of a Deutsche-Commerzbank merger last year overlooked the difficulty of bringing together two large German employers, including significant job cuts that labor unions resisted. The aborted merger was a distraction at a time when both lenders needed to get their own houses in order.Nor should it have been a surprise that Commerzbank didn’t want to employ the consulting services of Cerberus’s advisory arm. While Deutsche Bank hired Cerberus in that capacity, the role was controversial because it gave a division of the private equity firm access to sensitive information (albeit across a Chinese wall).In fairness, the banking world did look rather different when Cerberus made its merger gambit. Interest rates were expected to rise, not head deeper into negative territory, and a redesign of Germany’s fragmented banking market wasn’t inconceivable. Cerberus is also an investor in Hamburg Commercial Bank, which was privatized in 2018.Unfortunately for Commerzbank’s shareholders, banking profitability will remain strained for some time. Loan losses from its core Mittelstand customers could hit profit as Covid-19 and trade tensions curtail economic activity. Zielke, who has hired McKinsey & Co. to review the business, has pledged deeper cuts. But getting buy-in to reduce jobs in the aftermath of a pandemic will be tough. Half of the bank’s supervisory board members are employee representatives, and job reductions need to be negotiated with a works council.Shareholder activism in banking hasn’t had much success, with attempts failing at Barclays Plc and UBS Group AG. Regulators need be won over to the cause, and in this case the government too. Cerberus going on the attack may be more about saving face with its own investors, but battling a German lender that anyone would struggle to turn around is a thankless task.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

FCA fines Commerzbank £37m for anti-money laundering failures

The UK’s Financial Conduct Authority said the bank's poor controls 'created a significant risk' of undetected financial crime.

Britain fines Commerzbank $47 million for poor controls

Britain's financial watchdog said on Wednesday it had fined the London branch of Germany's Commerzbank 37.8 million pounds ($47.34 million) for failing to have proper controls for preventing money laundering. "Commerzbank London was aware of these weaknesses and failed to take reasonable and effective steps to fix them despite the FCA raising specific concerns about them in 2012, 2015 and 2017," the Financial Conduct Authority (FCA) said in a statement. The weaknesses took place at a time when the FCA was publishing guidance on steps banks could take to reduce the risk of financial crime, and was enforcing action against several firms in relation to anti-money laundering controls, the watchdog said.