COMMERZBANK YESTERDAY braced itself for a loss in 2009 as Germany’s second largest lender pledged to drop bonuses and overhaul its incentive system, following an outcry about executive pay in its home country.

The bank said a loss in 2009 would be likely on the back of rising loan loss provisions and some €2 billion in costs for the integration of Dresdner Bank.

Eric Strutz, chief financial officer, said loan loss provisions, which had already soared by €1.4 billion to €1.9 billion in the past year, could rise by a further 10-20 per cent. The downturn in Germany and the accelerating crisis in eastern Europe have led to rising default expectations.

Mr Strutz said Commerzbank had a good start to 2009, driven by net interest income and a trading profit. “But we have to be realistic – 2009 will be another very difficult year for all banks,” he said.

In the fourth quarter, Commerzbank suffered further writedowns and a large deficit in its trading, commercial real estate and public finance operations, leading to a pre-tax loss of €822 million.

Mr Strutz said the bank aimed to scale back significantly its public finance and commercial real estate businesses this year.

Commerzbank’s full-year pre-tax losses totalled €378 million compared with a profit of €2.5 billion in 2007. The figure excluded its new subsidiary, Dresdner Bank, which will report its annual results next week with its former owner Allianz.

Dresdner Kleinwort, the investment bank that is being taken over by Commerzbank, caused a public outcry recently after it emerged it would pay €400 million in bonuses to employees for 2008.

Mr Strutz said 30 per cent of the €400 million were fixed in contractual agreements.

But he called on Dresdner Kleinwort’s investment bankers to voluntarily forgo their bonuses. “Where you have dumped money, you should not take money,” he said. Commerzbank said it would not pay a dividend for 2008.