Commerzbank says won't need public money to boost capital

27th October 2011, Comments 0 comments

Germany's second-biggest bank Commerzbank said Thursday it would not need public money to beef up its capital resources, but would sell risky and non-essential assets and retain profits.

The European Banking Authority has calculated that Commerzbank needs 2.938 billion euros ($4.1 billion) in own funds to reach a required "core Tier 1" capital ratio of 9.0 percent by mid-2012.

That was the figure agreed by EU leaders at a summit in Brussels on Wednesday so that banks can absorb expected losses on their holdings of Greek debt.

The 9.0-percent capital ratio is two percentage points higher and seven years earlier than under new international banking rules recently agreed in the Basel III regulators accord and is part of a package of measures aimed at restoring confidence in Europe's banks

The EBA estimated an extra 106 billion euros in all will be required to reach the ratio.

"We can reach the required ratio by means of a reduction in risk-weighted assets in non-core areas, the sale of non-strategic assets or retained earnings, for example," Commerzbank's chief financial officer Eric Strutz said in a statement.

"One thing goes without saying: We do not intend to make use of public funds," Strutz said.

During the last financial crisis in 2009, Commerzbank made use of government aid and the state now holds a 25-percent stake in its share capital.

It is one of the German banks most heavily exposed to Greek debt and will therefore have to take heavy writedowns as part of the agreed "haircut" of 50 percent.

Commerzbank is to publish third-quarter earnings on November 4.

© 2011 AFP

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