A capital decision

13 March 2013 By Dominic Elliott

The time is right for Germany’s second largest bank to raise equity. Commerzbank should go large. The bank needs to move fast to scotch fears about drip-drip dilution and indecisiveness. The shares may take a short-term hit but markets are looking kind.

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Commerzbank revealed plans for a 2.5 billion euros capital raising on March 13.
The move will see the German government cut its stake in the lender to below 20 percent from 25 percent. The state will convert part of its 1.6 billion euros worth of non-voting hybrid capital into shares and sell them to investors between mid-May and the beginning of June.
Commerzbank said it would repay the rest of the hybrid with cash proceeds from the share sale. The measures will raise Commerzbank’s Tier 1 capital ratio (under Basel III norms) to 8.6 percent.
Shares in Commerzbank were down about 10 percent by 1100 GMT.

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