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Business

Commerzbank shares slump after capital increase

Shares in Germany's second biggest lender have been the biggest losers in European stock markets after Commerzbank completed a capital increase aimed at boosting its core capital to meet tighter EU requirements.

Commerzbank announced on Tuesday it had raised 1.4 billion euros ($1.5 billion) in a capital increase aimed at boosting its financial buffers.

Germany's second biggest lender placed 113.9 million new shares with institutional investors by way of a so-called accelerated bookbuilding process.

"The placement price was fixed at 12.10 euros per share. The gross issue proceeds amount to a total of 1.4 billion euros," the bank said in a statement.

Following the completion of the capital increase, the bank's so-called Common Equity Tier 1 ratio - a measure of its financial strength - rose to 10.2 percent from 9.5 percent in March.

With the capital hike, Commerzbank met core capital requirements for European banks "faster than planned," the bank added.

Shares in Commerzbank fell 5 percent in Tuesday's morning trading at the Frankfurt Stock Exchange, making the stock the top decliner in the FTSEurofirst 300 index of European blue-chips.

Convincing figures

Investors sold Commerzbank in spite of robust figures for the first quarter of 2015. Between January and March, the bank posted a net profit of 366 million euros, up from just 200 million euros in the same period a year earlier.

Operating earnings more than doubled to total 685 million euros despite a hefty writedown on Commerzbank's loan business with Austria's Heta bank, the country's bad bank pooling toxic assets left over from the financial crisis.

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Merger rumors

The capital increase also reduced the German government's stake in the lender from 17.3 percent to 15.6 percent, fueling speculation that Berlin might push for a merger of the entity it had bailed out in the wake of the 2008 financial crisis.

Some policymakers had mulled the option of merging Commerzbank with Deutsche Bank's retail lender Postbank to create a stronger retail banking unit to compete against German market leader, the Sparkasse savings banks.

News agency Reuters, however, quoted an unnamed Commerzbank source on Monday, saying the capital increase was in no way linked to the planned sale of Postbank by Deutsche Bank.

The source noted that Commerzbank has always set its sights on more affluent clients, meaning Postbank's not so well-off customers would not be a good bargain for it.

uhe/sri (Reuters, dpa)

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