COMMERZBANK AG abandoned its goal for a full-year profit after losses tied to the failure of Wirecard AG added to surging costs to cover bad loans, underscoring the challenges as the lender seeks to emerge from a leadership crisis.

Commerzbank stashed away €469 million in the second quarter to deal with an expected mountain of bad debt, according to a statement Wednesday. That’s the highest since 2013. For the full year, the bank now expects to set aside as much as €1.5 billion, up from €1.4 billion previously.

The outlook revision was driven by a single case, it said in its quarterly report. That exposure was Wirecard, according to a person familiar with the matter who asked not to be identified.

Commerzbank was plunged into disarray when Chief Executive Officer (CEO) Martin Zielke and Chairman Stefan Schmittmann last month announced their resignations amid mounting calls from shareholders for deeper cost cuts. Hans-Joerg Vetter, who succeeded Schmittmann on Monday, will now have to find a CEO who can navigate the conflicting demands of stakeholders and put the lender on a more sustainable footing during the country’s worst crisis since World War II.

Commerzbank said bad loan provisions could reach between €1.3 billion and €1.5 billion this year. The firm is among the lenders hit worst by the collapse of Wirecard, which filed for insolvency after saying that €1.9 billion previously reported as cash on its balance sheet didn’t exist.

That hit is now likely to push Commerzbank into the red for the full year. But even before it cut the profit outlook, analysts were expecting the bank to post a full-year loss of about €300 million.

The outlook revisions makes it “all the more important that we reduce our costs in order to be able to cushion future burdens,” Chief Financial Officer Bettina Orlopp said in a press release. “We are working on this and have stepped up the cost target for this year.”

As a first step, the bank said it plans to bring costs down this year, after earlier targeting a level in line with last year.

Before Mr. Zielke announced his resignation last month, he was working on a radical overhaul that he was planing to present on the day he reported second-quarter results. That plan would have cut about a quarter of the workforce, closed as many as 80% of the branches, and shrunk its foreign presence while financing the restructuring by drawing down the capital cushion, Bloomberg has reported.

The appointment of Mr. Vetter, a former CEO of the regional lender Landesbank Baden-Württemberg, was opposed by Cerberus Capital Management, the most vocal critic of the bank’s leadership as of late. But with a stake of just around 5%, the US private equity firm has a limited say in a company still controlled by the government following a bailout. — Bloomberg

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