Commerzbank unveils 10% capital increase
The second largest German bank, Commerzbank, said Thursday it would raise its capital by 10 percent in a deal that would still leave the state with a holding of 25 percent plus one share.
A Commerzbank statement said the bank had reached agreement with Credit Suisse on the transformation of hybrid instruments that would result in a contribution equal to roughly 118 million shares, or 645 million euros ($845 million) at their price in early Thursday trading.
Commerzbank shares plunged by 3.10 percent to 5.465 euros while Frankfurt's DAX index of leading German stocks was essentially unchanged overall.
Credit Suisse is to acquire hybrid instruments known as Trust Preferred Securities from investors and and "contribute them as a contribution in kind to Commerzbank in exchange for new shares," the statement said.
That would be part of a capital increase "by means of a contribution in kind of a maximum of 10 percent minus one share," it added.
"The German Financial Market Sabilisation Fund SoFFin intends to continue to maintain its equity interest ratio in Commerzbank (25 percent plus one share) upon completion of the transaction," the bank said.
The operation would not have a marked impact on Commerzbank's Tier 1 capital ratio, but "will result in an increase of Core Tier 1 capital," it added.
That is a key measure of a bank's ability to withstand losses.
© 2011 AFP