Commerzbank Sells $6.9 Billion of Loans to JPMorgan, PAGShane Strowmatt and Nicholas Comfort
Commerzbank AG, Germany’s second-largest bank, sold 5.1 billion euros ($6.9 billion) of commercial real-estate loans in Spain and Japan and non-performing loans in Portugal.
Commerzbank sold 4.4 billion euros of the Spanish commercial real-estate assets and bad loans in Portugal to JPMorgan Chase & Co. and Lone Star Funds, Commerzbank said in a statement from Frankfurt today. The Japanese commercial real estate loans of 0.7 billion were sold to investment manager PAG.
Chief Executive Officer Martin Blessing is shedding riskier assets as part of an 18.2 billion-euro government bailout and as the European Central Bank prepares for a review and stress test of the continent’s 128 largest lenders this year. Blessing is looking to reduce noncore assets to 75 billion euros by the end of 2016 from 102 billion euros at the end of March.
While the sales will have a negative impact on second-quarter earnings of about 100 million euros, Commerzbank’s total non-performing commercial real estate loans are being reduced by almost a third and the “higher risk cluster” is almost run down, it said. Risk-weighted assets will drop by 3.2 billion euros.
“Obviously it would be better for shareholders if they could sell at a profit, but they’re still in a position where they need to take losses and 100 million euros looks pretty acceptable,” Dieter Hein, an analyst at Fairesearch GmbH who has a reduce recommendation on the shares, said by telephone from Kronberg, Germany.
The transactions include the entire operational commercial real estate activities in Spain and Japan as well as the transfer of employees to an affiliate of Lone Star and to PAG. Of the total 5.1 billion euros of loans sold, Commerzbank said it classified 1.4 billion euros as non-performing.
The company’s shares fell 0.2 percent to 12.49 euros at 3:12 p.m. in Frankfurt. Gains this year were 6.6 percent compared with an increase of 5.5 percent for the Bloomberg Europe Banks & Financial Services Index.