European Banks Warn of More Job Cuts

Mainland European banks today warned of a darkening economic environment throughout this year as they confirmed they had plunged into the red in the final quarter of 2008 and warned of thousands of job losses to come.

Dutch bank ING reported a final quarter loss of €3.7bn (£3.3bn), pushing it into a full-year loss of €729m. Bailed out by the state, the bank is shrinking its business drastically.

German rival Commerzbank, also bailed out with €10bn of government money, declared an operating loss of €378m in 2008.

But French bank Société Générale, which suffered a €4.9bn one-off hit in 2007 from rogue trader Jérôme Kerviel, bucked the trend with an operating profit of €543m in the final quarter of 2008. It reported a €3.7bn full-year operating profit and net earnings of €2bn.

ING, which sacked its chief executive when it accepted a Dutch state rescue, has appointed chairman Jan Hommen as its new chief. He admitted today that the bank had been "overtaken by the pace and severity of the downturn in the fourth quarter that eroded our earnings and our equity".

The bank has been handed €22bn in loan guarantees for its toxic assets and has already started a firesale of units. Hommen said ING's top priority in 2009 was to "further reduce asset exposures and rationalise the cost base".

ING will cut costs by €1bn this year and Hommen said he would reduce the complexity of the group by focusing on fewer businesses and markets, another signal that thousands of jobs are at risk.

Commerzbank bowed to severe political pressure after what its chief executive, Martin Blessing, called "one of the most difficult ever" quarters and scrapped all executive and staff bonuses but indicated it would reward employees working in profitable departments.

The bank, which has taken over rival Dresdner from insurer Allianz, said it was drawing up a new incentive and compensation scheme more closely linked to sustainable earnings.

Eric Strutz, the chief financial officer, said January had provided a good start to the year, but added: "We have to be realistic: 2009 will be another very difficult year."

SocGen indicated it had put the turbulence caused by the fallout over Kerviel behind it. Frederic Oudea, the new chief executive, insisted it had proven its "ability to cope with a serious financial and economic crisis". It is raising the dividend by a third to €1.20.

The French bank, also given a state capital injection in return for increased lending to businesses, is heavily exposed to eastern Europe and today said it taken a €300m charge on its Russian business. It also indicated it would pursue only "moderate growth" in risk-weighted assets but would cut costs further, with jobs on the line.

All three banks underlined the improvements to their capital base, with ING reporting a tier one ratio of 9.3%, Commerzbank one of 10.1% and SocGen one of 8.8%.