Commerzbank unveils plan to pay back state aid
Germany's second biggest bank, Commerzbank, unveiled Wednesday plans to redeem state holdings that originated with a 2009 bailout by raising 11 billion euros ($15.7 billion) in fresh funds.
Commerzbank said it would redeem 14.3 billion euros in silent participations held by the government by June, and pay off the rest by 2014 at the latest.
"Commerzbank is planning to redeem around 14.3 billion euros of the 16.2 billion euros in silent participations currently provided by the Financial Market Stabilization Fund (SoFFin)," a statement said.
The government's silent participation means it does not hold voting rights normally associated with the stake.
Another 3.27 billion euros "are to be repaid from excess regulatory capital," and 1.9 billion redeemed from future capital by 2014, the bank added.
Commerzbank shares posted a strong gain in early trading, though its plans to reimburse the state were initially announced in February.
The state will retain its stake of 25 percent plus one share moreover by "converting additional silent participations into shares," Commerzbank said.
Shareholders with the exception of SoFFin will be able to buy conditional mandatory exchangeable notes starting Thursday and they would be converted into normal shares after the deal is approved at an annual bank meeting that has been moved up to May 6.
"As a second step a capital increase with subscription rights is foreseen," with the rights issue to take place from the end of May to early June.
Capital markets were expected to provide 8.25 billion euros of the total amount of fresh equity, the bank said.
Once all the operations have been completed, Commerzbank's Core Tier 1 capital, a buffer that protects against major losses, will probably amount to 8.8 percent, the bank said.
Commerzbank expects to post a better-than-expected operating profit for the first quarter of 2011 and for the year as a whole, and be able to pay a dividend for the 2012 financial year, it added.
For 2011, it has forecast an operating profit significantly higher than the 2010 figure of 1.4 billion euros but it is unlikely the bank will pay a dividend, chairman Martin Blessing said in February.
He added then that the bank wanted to pay back "at least 10 percent" of the government aid this year, after it posted a 2010 net profit of 1.43 billion euros.
The bank was kept afloat during the financial crisis with government aid, but Berlin has raised pressure on the bank to begin reimbursing the funds to help reduce public debt.
Shares in the bank showed a gain of 1.32 percent to 5.67 euros in early trades on the Frankfurt stock exchange, wile the DAX index was 0.34 percent higher overall.
© 2011 AFP