Commerzbank AG, Germany’s second-biggest bank, had its debt rating lowered one step by Standard & Poor’s on concern the lender will struggle to boost earnings on a sustainable basis.
S&P cut Commerzbank’s long-term counterparty and senior unsecured credit ratings to A- from A, and its short-term rating to A-2 from A-1, the ratings company said in an e-mailed statement today. The outlook on the Frankfurt-based bank is negative.
“Commerzbank will have an increasingly tough time generating stronger, more stable, and sustainable earnings in core businesses that would be closer to levels at similarly rated banks,” S&P said in the statement.
Commerzbank, which got an 18.2 billion-euro ($23.5 billion) government bailout during the financial crisis, posted a second straight loss in the first quarter of this year after booking costs related to firing staff. The company began a 2.5 billion-euro share sale on May 15, its fifth capital increase in four years, to boost reserves and help pay back the state. The subscription period for the sale ends today.
Commerzbank pared gains of as much as 3 percent in Frankfurt trading, and was 0.5 percent higher at 8.05 euros by 3 p.m. local time. The shares have fallen 25 percent this year, compared with an 11 percent increase for the 40-company Bloomberg Europe Banks and Financial Services Index.
The firm, which handed the government a 25 percent stake in the 2009 bailout, is eliminating staff and winding down shipping and real estate units to help it return to profit. Poor economic conditions across the euro region, and even in Germany, leave Commerzbank “vulnerable to its high-risk lending concentrations” in certain segments, particularly commercial real estate and shipping, S&P said.
Moody’s Investors Service cut Commerzbank’s debt rating to Baa1 last month, one step lower than the bank is now rated by S&P, citing “intrinsic” weak earnings power.