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FINANCIAL CRISIS

Commerzbank applies for state aid

Commerzbank, the second-largest German bank, said on Monday it would benefit from €8.2 billion and €15 billion more in debt guarantees – becoming the second major financial institution to apply for state aid after the financial crisis.

Commerzbank applies for state aid
Photo: DPA

The bank also posted a third-quarter net loss of €285 million and an operating loss of €475 million.

“In truth, we have not covered ourselves in glory here. In future, we will have to improve,” chairman Martin Blessing said in a statement.

The international financial crisis cost the bank €1.1 billion in losses from market operations, the statement added.

Commerzbank responded to pressure from German authorities for banks to apply for aid under a rescue package that includes up to €80 billion in capital injections and €400 billion in loan guarantees.

The capital infusion will take the form of a “silent participation,” which means Berlin will not become an active shareholder in Commerzbank, and the cash will go directly towards boosting the bank’s so-called Tier1, or core capital.

That means investors’ holdings will not be diluted in Commerzbank, which can also use a capital increase as it is acquiring Dresdner Bank from the insurance group Allianz.

“We have decided to make use of the package because this is good for the bank, its employees and its clients,” Blessing said.

“As of today there is not current need for any guarantees. However, they offer additional and attractive refinancing options, in case markets should deteriorate again.”

Commerzbank said it had increased loan loss provisions to €628 million from €414 million, a sign the bank expects more turbulence in the future.

Commerzbank shares have lost one third of their stock market value in a month.

In accepting state aid, Commerzbank agreed to forego paying a dividend in 2009 and 2010 and its directors will see their salaries capped at €500,000 per year.

Despite insistent calls from German authorities, the only other private bank to ask for the assistance is property specialist Hypo Real Estate, which asked the state last week to back loans it gets from other banks over the next three years.

Deutsche Bank boss Josef Ackermann told German television late Sunday that the biggest private German bank was “strong” enough to do without state aid.

BANKING

German online bank N26 shutters US service

German online bank N26 said Thursday it was closing its operation in the United States next year, as regulators in Europe place the "fintech" start-up under increased scrutiny.

The N26 logo on a bank card.
The N26 logo on a bank card. Photo: picture alliance/dpa | Christophe Gateau

N26’s 500,000 customers in the US would be able to use their services until January 11th, 2022, the bank said in a statement, after which it would cease to operate in a market it first entered in 2019.

Instead the Berlin-based operation would “sharpen its focus on its European business”, where it already operates in 24 countries and is exploring expansion into more eastern European markets.

N26 said it would also look to launch new “investment products in the coming year” to sit along side its current account service.

Founded in 2013, N26 offers free, online-only banking services to around seven million clients and is one of Germany’s most high-profile financial technology or “fintech” firms.

In October, the bank raised $900 million from private investors, and announced a plan to hire a further 1,000 employees to reinforce its product development, technology and cybersecurity teams.

READ ALSO: German online bank N26 to create 1,000 jobs

At home, N26 has been in the crosshairs of the German banking watchdog BaFin since 2018 after a local news media investigation found that it was possible to open account with forged IDs.

Earlier in the month, the regulator said it was upping its oversight operations at N26, appointing a special representative to monitor the bank’s progress towards solving issues in “risk management with regard to IT and outsourcing” identified by BaFin.

The regulator also limited the number of new customers N26 could take on to 50,000 a month until the shortcomings were addressed.

N26 was already being monitored by BaFin over failures in the start-up’s anti-money laundering system.

BaFin issued N26 with a 4.25-million-euro ($4.8-million) penalty earlier this year in connection with around 50 “suspicious transactions” the bank failed to report promptly enough.

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