Commerzbank Warns Of Pandemic-Related Bankruptcies In 2021

Commerzbank, Germany’s second-largest bank, is bracing for widespread bankruptcies among small and mid-sized business customers as the pandemic continues to weigh heavily on the global economy.

Facing a second national lockdown in Germany, the bank has significantly upped its loan loss provisions, according to a report in the Financial Times on Thursday (Nov. 5).

“We don’t have any signs suggesting we should be looking particularly optimistic into the coming weeks,” said Bettina Orlopp, Commerzbank’s chief financial officer, adding that the new restrictions risk disrupting the holiday shopping season.

On Thursday, Commerzbank released weaker-than-expected third-quarter earnings, posting a net loss of €69 million, compared with a profit of €297 million for the same quarter in 2019. Commerzbank’s loan loss provision for the third quarter was €272 million. The bank now expects to increase that amount in the fourth quarter, amounting to €1.3 billion to €1.5 billion for the full year, according to the FT.

Commerzbank said most of its customers who had deferred loan payments during the pandemic have since resumed. But it also warned that it may see a rise in bankruptcies next year when Germany’s insolvency laws, which have been suspended to help protect struggling businesses, go back into effect. As a result, the bank may be forced to take additional pandemic-related charges in the coming year.

Orlopp said that while the bank is not expecting a deluge of bankruptcies, the number will depend on how much support the government is able to provide to businesses for the second lockdown, per the report.

Several European nations are planning to go into lockdown or renew social distancing restrictions for the next several weeks in an effort to control the spread of a second wave of COVID-19 infections in the region.

Lockdowns and restrictions have led to surging demand for digital banking services and tools as customers adapt to the realities of virtual banking and commerce.