‘Even if we made strategic progress, the financial performance of the bank has been and is unsatisfactory,’ Commerzbank Chief Executive Martin Zielke said in a statement.

Photo: ralph orlowski/Reuters

Germany’s second-largest lender Commerzbank AG said Friday that its chief executive and chairman have submitted their resignations, as the bank faces pressure from shareholder Cerberus Capital Management for a deep overhaul due to persistent poor performance.

“Even if we made strategic progress, the financial performance of the bank has been and is unsatisfactory,” CEO Martin Zielke said in a statement. “And as CEO I bear the responsibility for that.”

Mr. Zielke’s offer of his resignation will be submitted for approval by the board on July 8. The resignation of Chairman Stefan Schmittmann will be effective Aug. 3. In a statement, Mr. Schmittmann said he shared responsibility for Commerzbank’s failure to convince markets that its overhaul, which included job cuts, was enough.

Commerzbank’s shares have sunk and its results have dipped as it faces stiff competition in its heavily banked home market and, like most European lenders, struggles to make money in a negative-interest-rate environment and under stringent regulatory capital requirements.

The bank posted a €295 million ($332 million) loss in the first quarter, its shares are down 25% this year and its price-to-book value is lower than comparable European and German lenders. Commerzbank’s business has historically depended heavily on the German Mittelstand market of small and medium-size companies, many of which have been especially hard hit by the coronavirus pandemic.

Last year, Commerzbank and Deutsche Bank held talks for a long-discussed merger. But it failed, leaving both banks scrambling to come up with separate plans to become more profitable quickly.

Last month, U.S. private-equity firm Cerberus, which holds more than 5% of Commerzbank, sent a letter to Mr. Schmittmann complaining the bank “has not presented a coherent strategy and has failed to implement even its own progressively less ambitious plans.”

The letter, seen by The Wall Street Journal, also called for “significant change at the supervisory board, the management board and the company’s strategic plan.” Cerberus said it wanted to name two new supervisory board members.

A person familiar with the shareholder said Friday that while not unexpected, the timing of the resignations was surprising, leaving a governance void at the bank. Key shareholders will work with the board to resolve that, the person added.

Cerberus is Commerzbank’s second-largest shareholder after the German state, which ended up with over 15% of the bank following a rescue plan during the financial crisis. The government paid about €26 a share then. The stock closed Friday at €4.13. In mid-2017, when Cerberus disclosed its stake, shares of Commerzbank were above €10. That leaves Cerberus sitting on a paper loss of around €400 million.

Following the failed merger talks with Commerzbank, Deutsche Bank announced a big overhaul, which included sharp spending cuts. So far, the plan has convinced the markets, lifting its shares 22% this year.

Analysts said Commerzbank’s overhaul plan was much less ambitious. For instance, the bank said it aimed to have a return on equity—a key measure of profitability—of more than 4% over the medium term. Deutsche Bank is promising a return of 8% by 2022.

Anke Reingen, an analyst at RBC Capital Markets, said while in the short term the resignations may trigger instability, in the “medium to long term, the changes in management might be positive for the shares as the bank changes its strategy more dramatically and/or it might be part of [European Union] bank consolidation.”

Write to Patricia Kowsmann at patricia.kowsmann@wsj.com

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