Commerzbank to rely on profits for capital raising

City A.M. Reporter
COMMERZBANK plans to retain earnings and cut risky assets to plug a €5.3bn (£4.4bn) capital shortfall rather than seek a government bailout, although analysts warned it may still need state help if the economy worsens.

Germany’s second largest lender said yesterday it had already set aside €3bn worth of the capital it needs to raise by June to shore up its balance sheet.

Chief executive Martin Blessing said the bank planned to decrease the need for Core Tier 1 capital by up to a further €3.3bn to meet the full capital need, driving up its shares on hopes it might avoid state support.

Analysts had feared Commerzbank would have to resort to government help if it could not find ways to generate the capital.

“Whether Commerzbank chief executive Martin Blessing really copes without a state bailout won’t become clear until June,” said Kepler Equities analyst Dirk Becker.

A key question is whether Commerzbank can maintain the same level of profitability it saw in 2011, as Eurozone recession fears are stoked by the bloc’s debt crisis. If it cannot, then it will not be able to retain more of earnings to build capital.