Commerzbank AG said it doesn’t plan to ask for government funds after a European regulator deemed Germany’s second-largest lender requires more than half the capital needed by the country’s banks.
The European Banking Authority calculated that Commerzbank needed 2.94 billion euros ($4.1 billion) to reach a required 9 percent core Tier 1 capital ratio starting in mid-2012, the Frankfurt-based lender said in statement today. The EBA said late yesterday that German banks need to raise 5.2 billion euros in fresh capital.
European leaders are demanding banks raise capital to bolster their resilience after they agreed to losses on Greek bond holdings to help rescue the country. Commerzbank, which sought aid from the German government after the collapse of Lehman Brothers Holdings Inc., joins larger competitor Deutsche Bank AG in saying it won’t need state assistance.
“We do not intend to make use of public funds,” Commerzbank Chief Financial Officer Eric Strutz said in a statement today. “We can reach the required ratio by means of a reduction in risk-weighted assets in non-core areas, the sale of non-strategic assets or retained earnings, for example.”
Deutsche Bank said Oct. 25 that it can raise its core Tier 1 capital ratio to more than 9 percent by the end of June without measures beyond those scheduled to take effect at the end of 2011. Christian Streckert, a spokesman for Deutsche Bank, said that is still valid and directed questions on the Frankfurt-based firm’s capital needs to the EBA.
Germany’s biggest bank won’t need to ask the state for funds, CFO Stefan Krause said on a conference call this week where he presented the analysis, which is based on external analyst estimates for the company’s prospective profits.
European leaders last night persuaded bondholders to take 50 percent losses on Greek debt and boosted the firepower of the region’s rescue fund to 1 trillion euros to try to stop the crisis from spreading. Europe also struck the accord on bank recapitalization, setting a June 30 deadline for lenders to reach core capital reserves of 9 percent or more after writing down their sovereign-debt holdings.
The EBA estimated capital needs at 106 billion euros, with Spanish banks requiring 26.2 billion euros and Italian banks 14.8 billion euros. It gave them until Dec. 25 to submit money-raising plans to national supervisors. Banks that fail to raise enough capital in the market will first tap national governments, falling back on the European Financial Stability Facility rescue fund only as a last resort.
“We welcome the fact that the markets now have clarity with respect to the requirements put into place by EBA from mid-2012 onward,” Commerzbank said.
Commerzbank cut its sovereign risks related to Greece to 2.2 billion euros as of June 30, from 3 billion euros six months earlier after recording impairments of 760 million euros on Greek sovereign bonds, the company said Aug. 10.
The German lender said June 7 that it completed a 5.3 billion-euro share sale in addition to raising 5.7 billion euros from selling conditional mandatory exchangeable notes to repay government aid.
Chief Executive Officer Martin Blessing said in April that the bank planned to repay about 14.3 billion euros in so-called silent participations to Germany’s Soffin bank-rescue fund by June through the sale of new shares and use of excess reserves. The lender received more than 18 billion euros from the state after agreeing to buy Dresdner two weeks before the collapse of Lehman Brothers.
Soffin maintained its stake of 25 percent plus one share in the lender. Commerzbank said in May that it had already repaid 4.3 billion euros of silent participations, a form of non-voting capital used in Germany, after completing the first step of the capital increase.
Norddeutsche Landesbank Girozentrale plans to increase its core capital by 660 million euros by June 30, 2012, the German state-owned lender said today in an e-mailed statement.