GERMAN lender Commerzbank yesterday revealed plans to issue millions of shares and sell off a major property loan portfolio in an effort to raise capital and reduce the government’s stake in the bank.
The group hopes to raise around €2.5bn (£2.1bn) in the equity issue, giving existing shareholders the first chance to buy the discount shares before opening up the offer.
As a result the group’s common equity tier one ratio will rise from 7.5 per cent currently to 8.4 per cent, with the nine per cent target under Basel 3 rules expected to be reached by the end of 2014.
More than 555m shares will be issued at a price of €4.50, a discount of more than 50 per cent on yesterday’s close price of €9.31.
For every 21 shares investors own, they will be able to purchase 21 of the new issue.
The subscription period will run from today until Saturday 18 May, and will be traded on the regulated market of the Frankfurt exchange until 24 May before joining the rest of the stock on 29 May.
The announcement sent shares tumbling as investors were diluted again by the offering. Commerzbank stock slid by 5.25 per cent yesterday.
Under the arrangement the state’s bailout fund will sell €625m-worth of stock to cut its ownership stake from 25 per cent to well under 20 per cent.
The vast majority of the bank’s €16.4bn bailout has already been paid back.
The biggest chunk of that came in 2011 when €14.3bn was recovered by the state, and the lender hopes to be fully in private hands again by the end of next year.
And the group is also planning to sell off its €5.7bn of UK property loans. The sale forms part of a wider movement across European banks – and particularly those backed by governments – to sell off foreign assets to free up capital and focus on domestic lending.