Commerzbank AG (CBK), the German bank that got a 18.2 billion-euro ($23.5 billion) state bailout, completed its fifth capital increase in four years, the day after Standard & Poor’s cut its credit rating, warning of risky lending.
Shareholders took up 99.7 percent of subscription rights in the 2.5 billion-euro share sale held between May 15 and May 28, when 555.6 million new shares were issued, Frankfurt-based Commerzbank said in an e-mailed statement today.
Chief Executive Officer Martin Blessing asked investors to buy the stock as part of a plan to return to profit and repay debt to the government. S&P lowered Commerzbank’s long-term credit rating to A- from A, saying economic conditions had left the firm vulnerable to “high-risk lending concentrations,” particularly in shipping and property.
Germany’s second-largest bank will use the funds it raised in the share sale to repay 1.6 billion euros to the government’s bank rescue fund and 750 million euros to insurer Allianz SE (ALV), redeeming silent participations issued during the rescue, Commerzbank said. The government’s stake has declined to 17 percent during the capital increase, it said.
The bank’s capital adequacy ratio under full Basel III banking rules, a key measure of financial strength, increased to 8.4 percent from 7.5 percent as a result of the repayments, Commerzbank said.
Blessing, who handed the government a 25 percent stake in the 2009 bailout, is also eliminating staff and winding down real estate and shipping assets to help turn the company around.
Commerzbank shares fell 0.4 percent to 7.97 euros at 1:45 p.m. in Frankfurt, paring earlier losses of as much as 2.4 percent. The stock has dropped 26 percent this year compared with a gain of 9.2 percent for the Bloomberg Europe Banks & Financial Services Index.
Six of 34 analysts are recommending clients buy Commerzbank’s shares, data compiled by Bloomberg show. The average 12-month price estimate among the analysts was 8.24 euros a share, 3 percent more than yesterday’s closing price.
Moody’s Investors Service lowered its rating to Baa1 last month, one step lower than S&P, citing weak earnings power.
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