Commerzbank AG (CBK), Germany’s second- biggest bank, will boost core Tier 1 capital by €776 million ($1.02 billion) in the first half after swapping hybrid capital instruments for new shares.
Commerzbank is exchanging about 361 million new shares for hybrid capital and other debt securities with an aggregate principal amount of €965 million, the Frankfurt-based lender said today. The swap, announced Feb. 23, will boost after-tax earnings by €87 million in the period.
European leaders ordered banks to raise capital by June 30 to restore confidence in the industry amid Europe’s sovereign debt crisis. Chief Executive Officer Martin Blessing, who has spent three years trying to free Commerzbank from the government aid needed to survive fallout from the 2008 collapse of Lehman Brothers Holdings Inc., has now completed the third measure to meet European Banking Authority’s requirements.
The transaction will boost the gauge of financial strength by €1.2 billion and pretax profit by €484 million through 2017, the bank said. Commerzbank said on Feb. 23 that the swap could boost core Tier 1 capital by more than €1 billion. The new shares will be exchanged at a price of €1.9128, it said today.
Germany’s Soffin bank rescue fund will maintain its 25 percent stake in Commerzbank by converting a portion of its silent participation into 120 million shares. Silent participation is a form of non-voting capital used in Germany that is not accepted by the EBA as core Tier 1 capital, Bloomberg reported.
In December, the EBA told European banks to raise €114.7 billion in capital by the end of June as part of measures introduced to respond to the euro area’s fiscal crisis. The regulator called for lenders to have core Tier 1 capital of at least 9 percent of their risk-weighted assets after accounting for writedowns on some European sovereign bonds.
