Germany's second-biggest lender, Commerzbank, has announced it's made big progress in increasing its core capital to meet requirements as determined by the European Banking Authority (EBA).
Germany's second-largest financial institution, the partly nationalized Commerzbank, said on Monday it had been able to strengthen its balance sheet and put aside more resources for a rainy day.
The bank said it was making very good progress with the implementation of a package of measures geared towards boosting its core tier-one capital as requested by the European Banking Authority (EBA).
Following a stress test last year, the EBA had identified a gap of 5.3 billion euros ($6.99 billion) for Commerzbank.
But the German lender announced on Monday that it had closed the gap by another 776 million euros, raising its nominal capital by seven percent.
Parting with some dead wood
Commerzbank achieved this primarily by swapping so-called hybrid capital instruments and subordinated debt securities for shares. The German state exchanged part of its deposits for share certificates and thus keeps its 25-percent share in Commerzbank.
It said the latest in a series of large-scale swaps would wash an additional 484 million euros into the bank's coffers by 2017 because of lower interest payments to be made.
Until recently, Commerzbank had needed another 1.8 billion euros to raise its core capital by June to the level determined by the EBA, meaning that after the latest round of financial transactions only about one billion euros have to be raised.
Commerzbank said it wouldn't have any problems closing the gap until June, adding that it expected earnings of some 1.2 billion euros from its core banking business in the first half of 2012.
hg/ng (dpa, Reuters, AFP)