Commerzbank Agrees With EU to Change Terms of 2009 Bailout

Commerzbank AG, the German lender rescued following the 2008 financial crisis, reached an agreement with the European Union on restructuring measures related to its bailout, the EU antitrust chief said.

EU Competition Commissioner Joaquin Almunia announced the agreement to reporters in Brussels today and said formal details of the restructuring measures will be given on March 30.

Under the terms of the deal, Commerzbank, Germany’s second-largest lender, would cut its balance sheet to 600 billion euros ($800 billion) by the end of 2014 and hold off on making acquisitions for two years, a person familiar with the situation said last week. Commerzbank won’t have to sell its Eurohypo public-finance and commercial-property unit to gain approval for the bailout as originally planned, the person said.

“We were discussing how to modify the commitment regarding Eurohypo and we have reached an agreement with Commerzbank and with the German authorities,” Almunia said. “This is a very positive fact.”

Simon Steiner, a Commerzbank spokesman, declined to comment.

Commerzbank sought EU approval to change the terms of its bailout, which required it to sell Eurohypo by the end of 2014. The Frankfurt-based lender has said a sale of Eurohypo would be difficult because of concerns over the division’s ability to fund itself.

Risk Remains

“This is a good deal for Commerzbank as they only could have divested Eurohypo by paying somebody a few billion euros to take it,” Konrad Becker, a Munich-based analyst at Merck Finck & Co., said by phone today. “There are no buyers for Eurohypo as the unit cannot refinance itself on a stand-alone basis. But of course, now the risk remains with Commerzbank.”

EU regulators have required banks to sell assets to compensate for the harm to competition caused by large amounts of aid pumped into the industry following the collapse of Lehman Brothers Holding Inc.

Commerzbank cut its total assets to 662 billion euros at the end of last year from 1.05 trillion euros at the end of 2008, according to an online presentation by the bank.

Eurohypo tapped the European Central Bank’s three-year loans in December to reduce the unit’s funding dependence on Commerzbank, Chief Financial Officer Eric Strutz told analysts last month.

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