May 11, 2021

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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 Restructuring

A 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 Perspective

Boekhout 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.)

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