Commerzbank ‘Cheap’ as Bank May Pass ECB Test, Exane Says

Investors should own Commerzbank AG (CBK) as Germany’s second-biggest lender may pass a test of its financial health by the European Central Bank, according to Exane BNP Paribas.

Commerzbank, which has gained more than 50 percent since the end of July, still commands a “sufficiently compelling” valuation, Guillaume Tiberghien, a London-based Exane analyst, wrote in a note to clients today. “Improving odds of passing the test should allow the re-rating to continue.”

The ECB is assuming oversight of Europe’s biggest banks from national regulators to ease the debt crisis by helping to break the link between states and their lenders. Frankfurt-based Commerzbank is among lenders with unprofitable loans that are waiting to see how tough the central bank will be when determining if banks need additional capital to withstand more stressed scenarios.

Commerzbank rose as much as 1.5 percent to 9.877 euros in Frankfurt trading today, the highest intraday level since March, and was 1 percent higher as of 12:40 p.m. local time.

Exane, which has an outperform recommendation on the stock, raised its price target 26 percent to 11.7 euros.

Commerzbank would pass the ECB’s test if non-performing loans at its unprofitable unit for winding down assets were to almost double, the analyst wrote. That calculation also assumed a 6 percent capital requirement, according to the note.

The bank is “well positioned” for the ECB’s review after similar audits of its assets, Stephan Engels, Commerzbank’s chief financial officer, told analysts on a conference call in August. “I do not see any specific risk there.”

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net

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

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