Commerzbank warns of rising loan losses Commerzbank scaled back ambitions for its struggling retail bank and ruled out paying a dividend until at least 2014 as Germany's second largest bank by assets continues to restructure following the financial crisis. The bank, still a quarter-owned by the government after a 2009 bailout, is trying to get rid of a burden of non-core assets while meeting tougher regulatory goals at a time of faltering revenues from its core businesses. It reported third-quarter net income of €78m compared with a €687m loss in the same quarter last year, when results were hit by losses on Greek bonds. But Stephan Engels, chief financial officer, said the bank expected rising loan-loss provisions and lower operating profits in the final three months of the year. The bank said it would invest €2bn in trying to improve its core businesses, half in retail banking, while keeping costs stable until 2016. It hopes to add an additional 1m retail banking customers, up from the current 11m, by 2016 and increase operating profits to €500m. That is half the level that the bank thought it would earn this year from retail banking, according to its last strategic plan drawn up three years ago. So far this year, operating profits from the business have been €215m. Confirming its decision to keep a scaled-down investment bank, Commerzbank said this would be an "international niche player," where it would try to generate a return on equity of more than 15 per cent. The bank also said it would try to divest at least 40 per cent of its €160bn of non-core assets, in fields such as commercial property and ship finance, over the next four years. "We are investing . . . in the development of a modern multi-channel bank and the flexbilisation of our branch network," said Martin Blessing, chief executive. The bank did not detail expected job losses or restructuring costs, and expects tough negotiations with staff unions over how to reshape its network of 1,200 branches, where earnings are sharply below the level expected when the bank decided to buy Dresdner Bank in 2008. Mr Engels also said Commerzbank intended to make early repayment of long-term loans taken from the European Central Bank as part of its measures to stabilise the eurozone financial system. Assets from the "long-term refinancing operations" should be repaid two years early in the first quarter of next year. We strengthened our already strong liquidity reserve further over the last months. We also sustainably improved our funding structure," Mr Engels said.