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Wirecard debacle costs Commerzbank €175 million in bad loans

Wirecard debacle costs Commerzbank €175 million in bad loans

Germany's Commerzbank has written off €175 million in loans made to collapsed payment processor Wirecard, a figure which is likely to push the bank into the red for the full year.

Commerzbank has so far set aside €469m in risk provisions since the start of the year. Reporting its second quarter results, the bank has included the €175 million loss made on Wirecard alongside €131 million attributed to Coronavirus effects.

Wirecard had a credit facility of 200 million euros with Commerzbank, of which about 90% was drawn at the time of its undoing, Bloomberg has reported. ING, ABN Amro Bank and Landesbank Baden-Wuerttemberg all had a similar exposures.

In total, the Wirecard debacle is likely to costs its banking lenders up to €1.8 billion.

The results from Commerzbank follow the dramatic resignations of CEO Martin Zielke and chairman Stefan Schmittmann last month amid mounting pressure from shareholders for deeper cost cuts.

In the second quarter the bank says operating costs continued a downward trajectory by €53 million to €1,526 million (Q2 2019: €1,579 million) in spite of IT investments. The ongoing programme of headcount reductions also contributed to this. At the end of June 2020, the number of full-time positions in the bank was around 39,700, which is around 1,000 FTEs less year-on-year.

With Zielke ousted, the bank appears to be ready to double down on its cost reduction strategy according to German newspaper Handelsblatt, drawing up plans to close 450 of its 1,000 branches, and reduce its workforce of 40,000 by as much as 11,000.

Elsewhere in the mangled wreckage from Wirecard's insolvency, the firm's mobile payment platform boon has also announced plans to shut up shop, giving customers up to 3 October to drain their accounts before winding up.

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