Commerzbank to pay back €14bn bailout

GERMANY’S second-largest bank Commerzbank announced its plan for an ambitious capital raising to repay the majority of its government bailout yesterday.

The bank said it would raise a total of €11bn (£9.6bn) through an €8.25bn rights issue between May and June, and by converting €2.75bn of the German government’s current non-voting stock into shares.

It aims to repay 88 per cent, or €14.3bn, of the €16.2bn bailout it was granted in the financial crisis by June this year, to enable it to resume dividend payments and increase its bankers’ salaries. Another €3.3bn will be paid from its own saved capital, while the remaining €1.9bn would be paid down by 2014 at the latest.

The German government owns a 25 per cent stake in Commerzbank following the 2009 bailout in the form of so-called silent participation, a form of non-voting share capital.

“We are surprised at Commerzbank’s determination to pay out €3.27bn of excess capital just a few weeks before the European banks stress test,” said RBS analysts. “Management must be fully convinced that it will pass the stress tests even after the payout.”

The long-awaited package is subject to shareholder approval at its annual meeting on 6 May. Commerzbank is among the first of the large European banks to tap capital markets for fresh funds before tough new Basel III regulations take effect in 2013.