After the bank receives €10 billion ($13.6 billion) in fresh capital from the German banking sector stabilisation fund SoFFin, the federal government will hold a stake of 25 percent plus one share in the bank.
“We are weatherproofing our bank for an economically stormy environment. This will enable us to fulfill our responsibility to offer loans to the German economy and to ensure we will continue to be a reliable partner for our clients,” said Martin Blessing, Chairman of the Commerzbank Board of Managing Directors.
The planned capital measures will increase the bank’s core capital ratio (Tier 1, HGB) to approximately 10 percent with the aim of allowing it to meet the substantially higher capital requirements needed in the wake of the global financial crisis.
The government already provided Commerzbank with €8.2 billion in cash in December, along with loan guarantees worth €15 billion, and on Thursday the bank was trying to raise €1 billion via a Berlin-backed bond issue.
The move comes as Commerzbank buys another troubled German bank, Dresdner Bank, from insurance giant Allianz, putting its finances under strain.
Munich-based insurer Allianz will now also recapitalise Dresdner Bank, which is in the process of being taken over by Commerzbank, with €1.45 billion by transferring collateralized debt obligations.
The Finance Ministry said that taking a stake in Commerzbank was not nationalisation because it was “a silent participation” that did not include voting rights, which would have given the government a management say. Rather, the state sought to send “a strong signal for a strong bank,” it said.
SoFFin would pay €6 per share and the German government “is clarifying all further details with the EU Commission,” Commerzbank said.
Shares in the bank lost 13.79 percent to €5.25 by the close on Thursday, while the DAX index of leading shares was off 1.17 percent overall.