Activist Investor Targets Commerzbank

Activist Investor Targets Commerzbank

over 3 years ago2 mins

Mentioned in story

American activist investor Cerberus Capital Management wrote Commerzbank a cute little note this week just to say it’s completely failing its shareholders’ interests 📝

What does this mean?

Cerberus’s beef is that the German bank hasn’t met the financial targets it set itself back in 2016, and continues to focus on unprofitable revenue growth without cutting costs. Commerzbank has refused consultancy services from Cerberus’s advisory business too – an offer its rival Deutsche Bank readily accepted in the past. And what do you know, the activist investor is completely on board with Deutsche’s turnaround plan…

Source: Google Finance
Source: Google Finance

Cerberus has given Commerzbank a list of its demands, including its own seat on the board so it can directly influence the company’s strategy. And if those demands aren’t met, the firm reckons it could team up with other investors like the German government – also critical of Commerzbank’s plans – to force the changes it wants 💪

Why should I care?

When activists wield their influence in hopes of improving a company’s fortunes, their success can result in a rising share price that benefits other investors too – which might be why some bought into Commerzbank on Wednesday, pushing up its share price. Aviva might’ve been inspired too: the insurer used its status as one of the biggest shareholders in HSBC and Standard Chartered to voice disapproval of their support for Hong Kong’s new security rules this week, perhaps hopeful that pressure will change their minds 🇭🇰

The Federal Reserve shared its latest views on the US economy on Wednesday, and banks will no doubt be keen to consider how the central bank might support the economy without lowering interest rates and hurting banks’ profits – via “(https://www.brookings.edu/blog/up-front/2020/06/05/what-is-yield-curve-control/#:~:text=Under%20yield%20curve%20control%20(YCC,to%20zero%20isn't%20enough.)”, for example 🏦 But if rates do fall, at least one bank – Morgan Stanley – is ready to bolster its investment management business with acquisitions in an effort to help insulate it from the effects of low rates.

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