Commerz in the red after state bailout

GERMANY’S second-largest bank Commerzbank is today set to post a fourth quarter loss of €1.6bn (£1.4bn), after the group had to be rescued by a state bailout in the wake of its disastrous acquisition of Dresdner Bank in 2008.

In a snap pre-announcement yesterday evening, Commerzbank said it would record a worse-than-expected €1.6bn loss over a “typically seasonally weak” fourth quarter.

It is due to post a negative trading result of €561m for the three months to December, hit by difficult market conditions, further de-risking of its balance sheet and catering for its exposures to monoline insurers hit by the financial crisis.

The bank said its portfolio restructuring unit and corporate and markets division would be affected most severely.

Commerzbank expects impairments to have peaked in 2009, according to current guidance, though analysts are concerned about its potential exposure to the Greek sovereign bond market.

The group agreed to buy Dresdner Bank from insurer Allianz in a deal worth €9.8bn at the beginning of September 2008, just weeks before the collapse of Lehman Brothers sent global markets into a tailspin.

The move, which cost the jobs of 9,000 employees, was felt hardest in London by the employees of Dresdner Kleinwort, as Commerzbank reined in its activities in the investment banking sector.

But the deal proved too expensive for the bank, which received European Union approval last summer for an €18bn package of state aid from the German government as one of the most high-profile casualties of the financial crisis in the country.