Germany's second-biggest lender Commerzbank AG is planning to raise at least 5 billion euros ($6.4 billion) to buy back the government's stake, a newspaper reported on August 27. A spokesman for the bank, whose shares fell more than 3 percent on the Handelsblatt report, said there were no concrete plans for such a move and analysts said they did not expect any quick action by the lender.
However financial sources told Reuters that investment bankers, who earn large fees from capital increases, the state bailout fund Soffin and Commerzbank are looking into options for the government to dispose of its 25 percent stake. "But an official process has not yet been started," one person close to the matter said.
Merck Finck analyst Konrad Becker cautioned that he did think a capital increase of such size was likely before the bank had improved its profitability.
"Given the huge dilution a 5 billion euro capital increase would cause, due to the bank's current low share price we think a capital increase is not wise and not likely," Merck Finck analyst Konrad Becker said. LBBW analyst Alexander Groschke agreed.
"At the current share price of 6.4 euros, the market capitalisation amounts only to 7.5 billion euros. The AGM (annual general meeting) approved a capital increase of up to 50 percent or 3.75 billion at the current share price," he said.
Groschke also said he expects Commerzbank's share price to continue to be weighed down for a long time because interest payments on the government's non-voting "silent participation" limit the bank's ability to retain earnings, pay back state money and eventually pay dividends to shareholders.
"We still can't see how Commerzbank will break that vicious cycle," Groschke said.
Germany's Finance Minister Wolfgang Schaeuble earlier this month said the government wanted to sell its stake in Commerzbank as soon as possible. A finance ministry spokesman said that he could not say when the government exit might happen. Commerzbank hiked its outlook in August after releasing second-quarter results that beat expectations.
"Every day we work to repay the silent participation money more quickly," Commerzbank Chief Financial Officer Eric Strutz said at that time, referring to the non-voting capital that Berlin provided to help prop up the lender during the financial crisis.
In addition to buying a 25 percent stake in Commerzbank for 1.8 billion euros during the financial crisis, Berlin took a 16.4 billion euro tranche of non-voting capital to stabilise the bank's capital reserves. Commerzbank expects to start repaying the money it got from German bank bailout fund Soffin in 2012 at the latest.
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