Commerzbank climbed 4.7 percent to 6.25 euros, the biggest increase in almost two weeks, valuing the company at 7.1 billion euros ($9.2 billion). It pared its decline this year to 42 percent, the second-biggest drop on the 47-member Stoxx 600 Banks Index after Spain’s Bankia SA. (BKIA)
The sale of the U.K. loans marks progress in the lender’s plan to sell or wind down assets to comply with conditions for state aid Commerzbank took in 2009 and to raise capital levels. The company, in which Germany still holds a 17 percent stake, paid back some of the funds it took to weather the financial crisis in May after selling 2.5 billion euros of shares.
“Today was a good day for Commerzbank,” said Michael Seufert, an analyst with Norddeutsche Landesbank in Hanover, Germany who recommends investors hold the bank’s shares. “That’s mostly the sale of the U.K. loans but a little bit of takeover speculation doesn’t hurt either, even if it is unlikely to happen.”
Germany’s second-largest lender sold 5 billion euros of loans to Wells Fargo & Co. (WFC) and Lone Star Funds at a 3.5 percent discount to book value, Commerzbank said in a statement today.
The “low” discount of the deal helps ease one of the “key concerns about Commerzbank, namely that they won’t be able to sell their non-core portfolio without racking up large losses,” said Seufert.
Commerzbank said it now expects to reduce a portfolio of real estate, shipping and public finance to “significantly less than 90 billion euros” at the end of 2016 versus an earlier goal of 93 billion euros. The division comprised 143 billion euros of assets at the end of March, according to a presentation the Frankfurt-based company published on its website last month.
German Finance Minister Wolfgang Schaeuble spoke with UBS AG (UBSN) Chairman Axel Weber as the government considers selling shares to a foreign bank, Focus magazine reported two days ago, without saying how it got the information.
German Chancellor Angela Merkel’s government took 25 percent of Commerzbank in 2009 in return for providing an 18.2 billion-euro bailout. The stake declined in May, when the bank sold shares in its fifth capital increase in four years.
Finance Ministry Spokesman Marco Semmelmann declined to say whether Schaeuble talked with Weber and whether Germany has any immediate plans to sell shares to a foreign bank. Nils Hendrik Happich, a spokesman for Commerzbank in Frankfurt, declined to comment. The stake is held by the government’s rescue fund Soffin.
“It has always been the government’s goal to restrict the stabilization measures granted during the financial crisis to a period as limited as possible,” Semmelmann said from Berlin in response to e-mailed questions. “However, it is currently not conceivable when Soffin’s remaining holding in Commerzbank will be divested.”
Standard & Poor’s cut Commerzbank’s debt rating to A- from A in May, after the bank announced the capital increase, saying the company will struggle to increase earnings on a sustainable basis. Commerzbank posted a second straight loss in the first quarter after booking costs related to firing staff.
Dieter Hein, an analyst at Fairesearch GmbH in Kronberg, Germany, said the government is unlikely to sell a stake prior to parliamentary elections in September, when Merkel will seek a third term as chancellor. The government would take a 3.8 billion-euro loss on the shares, now worth 1.2 billion euros, if it sold them today, he said.
Chief Executive Officer Martin Blessing is eliminating staff and winding down shipping and real estate units to help return the bank to profit.
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