A bank with a plan
January 19, 2012
Commerzbank announced on Thursday that it has a plan to meet the new requirements of the European Union which demand a cushion of capital to protect against foreseen losses relating to the eurozone debt crisis.
According to the European Banking Authority's December statement, German banks were required to raise 13.1 billion euros ($16.8 billion) by June 30, with Commerzbank responsible for 5.3 billion of that.
The bank said it will go even further, raising 6.3 billion euros in capital by holding back cash from its quarterly earnings and cutting down on risky investments.
"On the basis of the current business planning and subject to no further deterioration in the macroeconomic environment, and in particular no further escalation of the sovereign debt crisis, Commerzbank expects to achieve further positive effects ... to meet the EBA capital requirement by June 30, 2012," the bank said in a statement.
Determined to be self-reliant
Commerzbank is already 25 percent owned by the state, and CEO Martin Blessing has repeatedly made it clear that he intends to avoid any further government bailouts. The bank had received a bailout of over 16 million euros from Berlin.
The announcement comes only a day after the financial ratings agency Moody's Investors Service downgraded Commerzbank from C minus to D plus, amid concerns for the bank's mortgage arm, Eurohypo.
Share prices, that had dropped on Wednesday's news of the downgrade, rallied after the statement on Thursday, up 10.6 percent to a nine-week-high of 1.56 euros.
Author: Stuart Tiffen (dpa, AFP, AP)
Editor: Nancy Isenson