Commerzbank AG (CBK), Germany’s second-biggest bank, agreed to sell its Eurohypo U.K. real estate lending unit to Wells Fargo & Co. and Lone Star Funds to comply with European Union state-aid rules following its bailout.
Wells Fargo, the largest U.S. home lender, will acquire about 4 billion pounds ($6 billion) of “high-quality” assets, Wells Fargo said in a statement today. Dallas-based Loan Star will buy about 1.3 billion pounds of non-performing loans. The loans were sold for about 3.5 percent less than book value.
“The news of the U.K. portfolio sale is positive, especially as it was done almost at book value,” said Michael Seufert, an analyst at Norddeutsche Landesbank in Hanover who recommends investors hold the stock. “That eases 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.”
Commerzbank is winding down Hypothekenbank Frankfurt after receiving aid from the German government during the sovereign debt crisis. The government took a 25 percent stake of Commerzbank in 2009 after providing a 18.2 billion-euro ($24 billion) bailout. That holding declined to 17 percent in May, when the bank sold 2.5 billion euros of shares in the fifth capital-raising in four years.
The disposal will reduce risk-weighted assets by 1.5 billion euros and lead to 179 million euros of charges in 2013, Commerzbank said.
Focus magazine reported today that the government is considering selling a stake to a foreign bank and German Finance Minister Wolfgang Schaeuble spoke with UBS AG Chairman Axel Weber to evaluate interest the Swiss bank’s interest in buying shares.
Commerzbank advanced as much as 4.5 percent to 6.23 euros and was up 3.3 percent at 6.17 euros as of 1:10 p.m. in Frankfurt, valuing the company at 7 billion euros.
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.”
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 Angela Merkel will seek a third term as chancellor. The government would take a 3.8 billion-euro loss on the shares, now valued at 1.2 billion euros, if it sold them today, he said.
U.S. investors such as San Francisco-based Wells Fargo (WFC) are seeking European loan books as the region’s lenders reduce their real estate assets to meet new regulations. Wells Fargo originated almost one in three U.S. mortgages in 2012, helping the lender post a third straight year of record profit.
Given “our recent expansion of commercial real estate services in the U.K., this transaction is a significant investment in the future growth of our U.K. platform,” Mark Myers, head of commercial real estate at Wells Fargo, said in the statement.
Barclays Plc advised Commerzbank on the loan sale.
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