FRANKFURT: Cerberus Capital Management LP is seeking two seats on Commerzbank AG’s supervisory board as the fund said in a confidential email that time is running out to turn around the lender.
The five-page letter, dated June 9 and sent to the supervisory board, portrays Germany’s second-largest bank as suffering from leadership that’s focused on unprofitable revenue growth and lacks resolve to slash a bloated cost base, according to a copy seen by Bloomberg News.
It also raises the possibility of a shareholder revolt should the bank refuse to appoint its representatives.
Cerberus said it is “alarmed by the refusal of the management and supervisory boards to acknowledge the seriousness of the situation and the abject failure to take appropriate remedial actions, ” adding the “window of opportunity to address the challenges is rapidly closing.”
The outburst highlights the fund’s growing frustration after Commerzbank shares lost about 59% in value since Cerberus revealed its 5% stake in July 2017.
That drop marks one of the worst stock performances among European banks in that time.
A Commerzbank spokeswoman declined to comment.
The New York-based investor said in its letter Commerzbank has “failed to implement any significant operational, technology or management initiatives” and has ignored suggestions brought forward by investors.
Cerberus owns about 3% of Commerzbank’s cross-town rival Deutsche Bank AG, which it has advised on its new strategy via its advisory arm, Cerberus Operations Advisory Company.
Cerberus didn’t name the two representatives it wants Commerzbank chairman Stefan Schmittmann to consider appointing. The fund said it expects a response by the end of this week.
Commerzbank held its annual shareholder meeting, at which investors typically elect supervisory board members, in mid-May. To accommodate Cerberus representatives, two current members would have to step down.
While the fund said it prefers to work constructively with the bank, it warned that other investors would “be highly supportive of efforts to enact significant change” at the supervisory and management boards as well as to the company’s strategy.
The German government is Commerzbank’s largest shareholder with a stake of just under 16%, according to data compiled by Bloomberg. — Bloomberg