Thursday, September 19, 2024

Germany Ushers In End of Commerzbank Rescue With Stock Sale Plan

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(Bloomberg) — Germany plans to sell a significant part of its stake in Commerzbank AG as it joins other European governments in exiting lenders they bailed out during the big financial crisis.

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Berlin plans to initially sell 3% to 5% in the Frankfurt-based firm, or very roughly a fifth of its current stake of 16.5%, according to people familiar with the matter, who asked not to be identified because the process is private. That disposal could happen as early as this month, with more sales possible at a later date, according to one of the people. A spokesperson for the Finance Agency declined to comment.

Germany’s current stake is worth about €2.5 billion ($2.8 billion). The country’s Finance Agency, which manages the holding, announced on Tuesday that it plans to reduce the investment, without disclosing by how much. The move is the “beginning” of Germany’s exit from Commerzbank, Finance Agency head Eva Grunwald said in the release.

The German government joins other European administrations including Italy, the Netherlands, the UK and Greece in selling down bank stakes they acquired through various bailouts during the financial crisis more than a decade ago. The transactions have involved ABN Amro Bank NV, NatWest Group Plc and Banca Monte dei Paschi di Siena S.p.A., though a large part of the deals already happened last year.

The German government has been mulling a sale of its Commerzbank stake for some time, with Bloomberg reporting two years ago it was waiting for the stock to continue rising. It was trading at about €8 per share at the time, compared with roughly €13 at present.

Commerzbank fell as much as 4.4% in Frankfurt trading on Wednesday and was trading 2.8% lower at 11:13 a.m., paring gains over the past 12 months to about 25%.

Like other European lenders, the firm has reaped the benefits from the European Central Bank’s series of interest rate hikes. That tailwind is set to fade as the ECB is widely expected to cut rates for a second time this year when it meets next week. Germany’s struggling economy is adding to the headwind.

“Commerzbank is a stable and profitable institution again,” German Deputy Finance Minister Florian Toncar said in the release on Tuesday. “The federal government will sell its shares in the successfully stabilized institute step by step.”

Germany would have needed to sell its Commerzbank shares at €26 apiece to break even, a previous administration has said. The country gave financial aid worth €18.2 billion during the bailout in 2008 and 2009 and the lender has since paid back about €13.2 billion, the government said in the statement on Tuesday.

Commerzbank is an important source of credit for Germany’s economy as it has a focus on providing funding for its exporting companies. The government is currently its largest shareholder. The next biggest investor is BlackRock Inc. with about 7%, according to data compiled by Bloomberg.

Chief Executive Officer Manfred Knof has approached state-backed funds from Asia and the Middle East to gauge their interest in buying a stake, Bloomberg reported last year. Commerzbank had been discussing internally the prospect and implications of the German government selling down its stake, people familiar with the matter said at the time.

(Updates with Finance Agency quote in third paragraph and details throughout.)

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