Update: Commerzbank AG

The negative outlook reflects the significant challenges management faces to recover Commerzbank to more solid and sustainable profitability amid weak operating conditions. The success of the revised restructuring plan is the key consideration for S&P Global Ratings' credit ratings on Commerzbank. We could lower our ratings on Commerzbank within the next 12-24 months if we observe a material setback in the bank's transformation, for example because of a significant delay in anticipated cost savings or increasing uncertainty over whether Commerzbank can widely preserve its revenue base during the restructuring process. While less likely, a downgrade could follow if asset quality was to develop materially weaker than we anticipate. We could revise our outlook to stable if we saw tangible progress

...Commerzbank needs to demonstrate tangible progress in its transformation. We consider proof of continuous substantial progress in its ambitious multi-year plan as a key consideration for our ratings on Commerzbank. While previous restructuring attempts had shown very limited success, the revised multi-year strategic plan that the bank announced in early 2021 again targets its main rating weakness of structurally low profitability. Commerzbank's top priorities are to achieve a significantly leaner cost base while preserving most of its revenue, and to accelerate the digitalizing of its operating platforms. We consider the plan as broadly achievable but ambitious with regards to revenues, considering an ongoing difficult operating environment with low interest rates and high competition. If it reaches its targeted pretax return on tangible equity of 7% and cost efficiency of 61% by 2024, we think this would bring Commerzbank's profitability closer to its cost of capital, and in line with...

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