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| Commerzbank first private German bank to ask for cash injection |
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Time is GMT + 8 hours
Posted: 3-Nov-2008 21:22 hrs |
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| The headquarters of Germany's second-biggest bank Commerzbank in Frankfurt, western Germany. Commerzbank will tap a government rescue fund for 8.2 billion euros (10.5 billion dollars) in cash and 15 billion in debt guarantees, it said on Monday, a move welcomed the finance ministry. |
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Commerzbank, the second-biggest German bank, will tap a government rescue fund for 8.2 billion euros (10.5 billion dollars) in cash and 15 billion in debt guarantees, it said on Monday, a move welcomed the finance ministry.. Commerzbank, which also posted a third-quarter net loss of 285 million euros and an operating loss of 475 million euros, said the cash would boost its core capital and not dilute investors' shareholdings.. A finance ministry spokesman called the decision "a very responsible approach" while Merck Finck analyst Konrad Becker said Commerzbank might have "broken the ice" and opened the way for other private banks to follow.. The bank responded to pressure from German authorities for banks to take advantage of a rescue package that includes up to 80 billion euros in capital injections and 400 billion in loan guarantees.. On Saturday, Chancellor Angela Merkel had pushed the plan again, saying it would help banks ensure they could continue with their primary functions of "lending and managing savings.". But the government has set stringent conditions on the funds that make private banks in particular less inclined to come to German authorities hat in hand.. The capital infusion will take the form of a "silent participation," which means Berlin will not become an active shareholder in Commerzbank, and the cash will go directly towards boosting the bank's so-called Tier1, or core capital.. There was "never a question" of a government representative sitting on the bank's supervisory board, chairman Martin Blessing told a press conference.. Commerzbank can use a capital increase as it is acquires Dresdner Bank, the third biggest private German bank from insurance group Allianz.. With the fresh funds, the bank's Tier1 ratio was raised to a robust 11.2 percent, a level which "ensures international competitiveness," the bank said.. "As of today there is no current need for any guarantees. Howver, they offer additional and attractive refinancing options, in case markets should deteriorate again, Blessing said in a statement.". But Commerzbank also said it had increased loan loss provisions to 628 million euros from 414 million, a sign the bank expects more turbulence in the future.. In accepting state aid, Commerzbank agreed to forego paying a dividend in 2009 and 2010 and its directors will see their salaries capped at 500,000 euros per year and will not receive bonuses this year or next.. Blessing has been receiving a salary of around 760,000 euros.. Despite insistent calls from German authorities, the only other private bank to seek help is property specialist Hypo Real Estate, which asked the state for 15 billion euros in guarantees for HRE loans from other banks.. Regional state-owned bank BayernLB has also sought 5.4 billion euros under the programme.. But Deutsche Bank boss Josef Ackermann told German television late on Sunday that the biggest private German bank was healthy enough to do without state aid contained in the Financial Markets Stabilization Fund approved on October 17.. Looking ahead, Commerzbank financial director Eric Strutz said: "The dramatic upheavals in recent weeks have shown again that reliable full-year forecasts for 2008 are not possible in the current environment.. "We will continue to face challenges in 2009.". Shares in the bank shot up in midday Frankfurt trading, gaining 5.34 percent to 8.88 euros while the DAX index of German blue-chips showed a gain of 0.64 percent overall.. They have nonetheless lost roughly two-thirds of their value since the beginning of the year. — AFP
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