Commerzbank Slides on Capital Increase: Frankfurt Mover

Commerzbank AG (CBK), the loss-making German bank that got 18.2 billion euros ($24 billion) in state aid, fell for a fourth day as Chief Executive Martin Blessing prepared to carry out the fifth capital increase in four years.

The stock slid as much as 6.5 percent in Frankfurt trading, extending a record low. It dropped 4.6 percent to 10.29 euros at 12:45 a.m., valuing the company at 6 billion euros. A decline of 28 percent this year is the biggest among 42 firms on the Bloomberg Europe Banks and Financial Services Index, which rose 3.5 percent, and on Germany’s DAX Index. (DAX)

Commerzbank, Germany’s second-biggest bank, plans to increase capital by 2.5 billion euros by the start of June after reducing the number of shares to 583 million from 5.83 billion in a reverse share split yesterday. The firm, 25 percent owned by the government after the 2009 bailout, is also eliminating staff and winding down shipping and real estate units to help it return to profit.

“The shares are staying under pressure ahead of the capital increase,” Philipp Haessler, analyst at Equinet Institutional Services in Frankfurt, who recommends investors sell the stock, said by telephone. “The new shares will probably be priced at 6 euros to 7 euros.”

The capital-raising plan, approved by shareholders on April 19, will be a “mixed cash capital increase/capital increase through contribution rights,” Commerzbank said yesterday without providing further details.

The bank reported a loss of 716 million euros in the fourth quarter and hasn’t paid shareholders a dividend since the financial crisis erupted in 2008. It will post another loss in the first quarter because of staff-reduction costs, Blessing said last week.

Moody’s Investors Service cut Commerzbank’s rating to Baa1 yesterday citing weaknesses in core banking activities and “intrinsic” weak earnings power. Standard & Poor’s placed Commerzbank’s credit rating of A on review in February, saying it had concerns about its business model.

To contact the reporter on this story: Annette Weisbach in Frankfurt at aweisbach1@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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