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Commerzbank hurt by loan losses

Commerzbank is closing branches and cutting jobs to reduce costs  
Commerzbank is closing branches and cutting jobs to reduce costs

FRANKFURT, Germany - Commerzbank said on Tuesday it expects to lose more than 1 billion euros ($874.9 million) on loans this year due to the collapse of high-profile corporate clients.

Germany's fourth largest bank said rising company failures -- such as KirchMedia and construction giant Philipp Holzmann -- had forced Commerzbank to increase its risk provisions to above 1 billion euros for 2002 from 927 million euros last year.

Commerzbank did not state its exposure to the two companies, but reports say it has an exposure of 350 million euros to the KirchGruppe -- which includes KirchMedia, the core rights and media business that filed for insolvency on Monday.

The bank reportedly had a 140 million euro exposure to Holzmann, 150-year-old construction giant that collapsed last month.

The increasing risk of bad loans in the past year has been caused mainly by the economic recession in Germany and the United States, which has also depressed profits in the financial sector.

Despite the weakness in the industry, Commerzbank on Tuesday reiterated that it expects to post a pre-tax profit of between 700 million and 800 million euros in 2002, compared to 976 million euros the previous year.

The bank plans to reduce its operating expenses to 2000 levels, mainly through branch closures and the elimination of 3,400 jobs.

Commerzbank also said it would sell its UK fund manager Jupiter and was looking for a buyer or a partner for its U.S. asset management business Montgomery. In addition, it confirmed an earlier report that it was merging its domestic asset management activities into a single group called Cominvest.

Shares in Commerzbank were up 3.4 percent to 20.15 euros in midday Frankfurt trading on Tuesday.


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