Capital boost for Commerz

STATE-BACKED German lender Commerzbank is selling a raft of new shares in a debt-for-equity swap, as it looks to raise capital to meet incoming regulations.

Germany’s second biggest bank yesterday said it would sell around €640m (£538.3m) of shares to bring up the amount of capital it holds to meet Basel III regulations.

Commerzbank plans to sell around 118m shares, priced between €5.25-€5.35 apiece, adding around €640m to the €6.8bn the bank already holds in capital.

In a complex transaction, Credit Suisse and several other investment banks will purchase Commerzbank trust preferred securities, a form of hybrid capital.

The Swiss bank is joined by Citigroup, Goldman Sachs and UBS, and will sell the shares to institutional investors.

Basel III global regulations, which come into force from 2013, require banks to hold higher levels of better quality capital in order to shield them from potential financial meltdown.

Commerzbank’s new share issue will increase the amount of core Tier 1 capital it holds, despite it not having “any noticeable impact” on the bank’s Tier 1 capital ratio, a statement said.