GERMANY’S second biggest lender Commerzbank yesterday announced plans for a €2.5bn (£2.1bn) share issue which will help cut the government’s stake in the bank to less than 20 per cent.
The German government currently owns 25 per cent of the bank after it stepped in to bailout the firm during the financial crisis with a €16.4bn loan in 2008 and 2009.
The bank said yesterday it will pay back the remaining €1.6bn of the loan to the German government but this does not include an additional €3.7bn of aid the government gave the bank by buying its shares.
The new share placing will be offered to existing shareholders, diluting the value of their existing equities.
Shares in Commerzbank plummeted more than nine per cent during trading yesterday on the back of the news.
Chairman of the board of managing directors Martin Blessing said: “With the complete repayment of the silent participations of SoFFin we are repaying ahead of schedule all components of the state support over which we have influence.
“At the same time we are improving Commerzbank's fully phased-in Basel 3 capital base on a sustainable basis and are enhancing future dividend paying ability.”
The move to cut the government’s stake below 20 per cent will withdraw the power it had to veto management decisions at the bank, loosening the government’s grip on the institution.
Commerzbank also said it would repay a €750m loan to insurer Allianz, which it took out in 2008.