Commerzbank Raises EUR2.5 Billion, Bold Step To Wean Off State Aid

By Ulrike Dauer

FRANKFURT--Germany's Commerzbank AG (CBK.XE) Wednesday said it raised around 2.5 billion euros ($3.2 billion) in gross proceeds from its recent capital increase aimed at weaning the bank off state aid and aligning key capital ratios better with peers.

As a result of the capital increase, the bank will be able to redeem the bulk of the remaining state aid it received in early 2009 to keep it afloat following the ill-timed acquisition of Dresdner Bank.

The bank's key capital ratio under final Basel 3 requirements will be 8.4% of risk weighted assets at the end of March, up from 7.5% prior to the capital increase.

The capital increase came at a large discount to the market price. It also required shareholders accept substantial dilution to their shareholdings, as the bank nearly doubled its outstanding stock, issuing 556 million new shares at EUR4.50 a share.

Between May 15 and May 28, Commerzbank offered 20 new shares for every 21 existing shares held. Shareholders exercised 99.7% of their subscription rights.

Commerzbank said some 1.7 million new shares not subscribed and 363,761 new shares for which subscription rights were excluded were sold in the market.

The move allows the bank to fully repay the remaining EUR1.6 billion in non-voting shares, known as "silent participation," still held by the German government's SoFFin financial markets stabilization fund, and the EUR750 million in non-voting shares held by Allianz SE (ALV.XE).

The German government participated in the capital hike, but pays for the new shares with shares it holds in Commerzbank. Subsequently, the government's stake in the bank, which it holds in addition to the non-voting shares, drops to 17% from the previous blocking minority of 25% plus one share.

The new shares have full dividend rights as of January 2013, should Commerzbank be in a position to resume a dividend payment for 2013.

Deutsche Bank, Citi and HSBC agreed to fully underwrite the capital increase volume.

This is the bank's fifth capital increase in just four years.

By comparison, larger peer Deutsche Bank AG (DB) recently raised EUR2.96 billion in the capital market, above the targeted EUR2.8 billion.

Write to Ulrike Dauer at [e-mail]

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