Commerz state deal backed

THE GERMAN government put the seal on its acquisition of more than 25 per cent of Commerzbank over the weekend, after the bank’s shareholders approved a share issue as part of state support for the lender.

In a near unanimous vote at the bank’s annual general meeting, investors approved the issue of 295m new shares at six euros apiece, the bank said, giving the German government a stake of 25 per cent plus one share.

The state has ploughed €18bn (£16bn) into the country’s second-largest bank in return for the equity stake, which it will take on via its emergency “SoFFin” bank rescue fund.

“With a Tier 1 ratio of around 10 per cent, Commerzbank is weatherproof and will implement its new strategy without delay,” said chairman Martin Blessing.

The bank had an inauspicious start to the year, reporting a first quarter loss of €861m, compared with a profit of €236m in the same period the previous year.

Much of the loss was attributed to last year’s acquisition of Dresdner Bank from rival Allianz, which was completed in January, shaving €290m from the bank’s bottom line.

The dismal performance saw the bank ditch its dividend and halt all bonuses in a bid to preserve capital.

However, Blessing forecast at the time that the bank would return to profit by 2011 at the latest, with an operating profit of more than €4bn by 2012.

The bank is undergoing a streamlining process as part of conditions set by the European Commission governing its approval for the German government to offer the firm financial support.