Germany’s second-biggest bank, Commerzbank, will be partially nationalized, with the state taking just over 25 percent in exchange for a 10 billion euro (US$13.6 billion) capital injection.
After German banking sector stabilization fund SoFFin injects the funds, “the federal government will hold a stake of 25 percent plus one share in the new Commerzbank,” a statement said.
The government had already provided Commerzbank with 8.2 billion euros in cash last month, along with loan guarantees worth 15 billion euros.
On Thursday, the bank sought to raise another 5 billion euros via a state-backed bond issue.
“We are weatherproofing our bank for an economically stormy environment,” Commerzbank chief executive Martin Blessing said in a statement.
“This will enable us to fulfill our responsibility to offer loans to the German economy and to ensure we will continue to be a reliable partner for our clients,” he said.
The government’s move came as Commerzbank buys another troubled German bank, Dresdner Bank, from Allianz in one of the most important German banking mergers ever, a deal that has put Commerzbank’s finances under strain.
“Against the background of the intensified financial crisis, the new bank will thus be enabled to meet the substantially higher capital requirements for banks,” a Commerzbank statement said.
The takeover of Dresdner Bank is expected to be completed in the coming days.
The finance ministry said that taking a stake in Commerzbank was not nationalization because it was “a silent participation” that did not include voting rights.
Allianz, which had expected to hold a stake of 18 percent in Commerzbank following the sale of Dresdner Bank, said on Thursday that it would own 14 percent of the new entity, making it the second biggest shareholder after the state.
The German government “is clarifying all further details with the EU Commission,” the Commerzbank statement said.
With the deal, the core capital adequacy ratio of the new Commerzbank would increase to around 10 percent of the bank’s total assets, the statement said.