Commerzbank writes of €1.5bn of goodwill

Commerzbank is heading for a bigger annual loss than expected after the German lender wrote off €1.5bn (£1.4bn) of goodwill and increased risk provisions linked to the Covid-19 crisis.

Gernany's second-largest bank said it was writing off existing goodwill because of worsening market conditions, highlighting low interest rates in the euro area and Poland. The market changes will reduce the value of deferred tax assets, it said.

Commerzbank also said its risk provisions would be at least minus €1.7bn including a €500m top-level adjustment for expected coronavirus impacts in 2021 and the impact of the second lockdown.

Manfred Knof, Commerzbank's chief executive, said: "After this balance sheet clean-up, we are well prepared for the road ahead of us. Our goal is to make the bank more profitable in the long term."

The bank said it would take the charges in 2020 indicating it will suffer a bigger loss than analysts have forecast. It said the goodwill writeoff would have no effect on its regulatory capital ratio which was about 13% at the end of 2020.

Chief Financial Officer Bettina Orlopp said: "By increasing our risk result we are responding to the ongoing Corona pandemic and feel well prepared for further developments this year."

Knof joined Commerzbank as CEO at the start of January from bigger rival Deutsche Bank, where he ran retail banking. He has said the bank needs fundamental change and is working on a strategy update.

The bank's shares fell 3.1% to €5.53 at 11:07 GMT.