Waiting to bloom

16 September 2010 By Nicholas Paisner

Germany’s secondlargest bank may need to find over 13 bln euros in capital to replace government support. Earnings and balance sheet pruning will get it some of the way there, but a big share issue looks inevitable. Thanks to regulators, Commerzbank can at least bide its time.

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Commerzbank's capital base includes 17.2 billion euros ($22.4 billion) of "silent participations". The majority of this capital was received from the German government's bank bailout fund in late 2008 and early 2009.

Under new Basel III rules the instruments will not qualify as common equity capital as they cannot absorb losses on an ongoing basis.

The Basel Committee on Banking Supervision said on Sept. 12 that banks would in future have to hold common equity capital equivalent to at least 7 percent of their riskweighted assets, including a 2.5 percent "capital conservation buffer".

However, the Basel committee also said that existing public sector capital injections would count towards capital ratios until Jan. 1, 2018.

Commerzbank said in November 2009 that it would begin repaying funds received from the government by 2012 at the latest.

The bank gained approval to issue up to 590 million shares at its annual general meeting in May 2010. It currently has 1.18 billion shares outstanding.

Commerzbank's shares closed at 6.47 euros on Sept. 14. The bank made a net profit of 1.1 billion euros in the first half of 2010.

Context News

Under new Basel III rules the instruments will not qualify as common equity capital as they cannot absorb losses on an ongoing basis.

However, the Basel committee also said that existing public sector capital injections would count towards capital ratios until Jan. 1, 2018.

Commerzbank said in November 2009 that it would begin repaying funds received from the government by 2012 at the latest.

The bank gained approval to issue up to 590 million shares at its annual general meeting in May 2010. It currently has 1.18 billion shares outstanding.

Commerzbank's shares closed at 6.47 euros on Sept. 14. The bank made a net profit of 1.1 billion euros in the first half of 2010.

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