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Bailout payback

April 6, 2011

Commerzbank had a good year in 2010, netting an operating profit of 1.4 billion euros. It announced in February that it plans to begin repaying state bailout funds. Now it wants to pick up the pace.

Euro banknotes
Commerzbank plans to repay the bulk of its bailout this yearImage: dpa/PA

Commerzbank announced Wednesday that it would accelerate efforts to repay the 16.2 billion euros ($23 billion) in bailout funds it received from the state in 2009 to combat the financial crisis.

Germany's second-largest bank wants to repay 14.3 billion euros in aid known as "silent participations" held by Germany's Financial Markets Stabilization Fund, SoFFin, by June.

To fund the move, Commerzbank plans to raise 11 billion euros in fresh capital in a move that requires a shareholder approval in vote in May or early June.

Martin Blessing
According to CEO Martin Blessing, Commerzbank is back on trackImage: picture-alliance/dpa

By 2014, Commerzbank It also wants to repay an additional 3.27 billion euros from "excess regulatory capital" and another 1.9 billion from future capital by 2014.

Improved situation

Less than two months ago, CEO Martin Blessing said the bank would probably only be able to repay about 10 percent of the bailout funds this year, and that shareholders should not expect a dividend as it grapples with the task of integrating the recently acquired Dresdner Bank into its operations.

But now the bank expects a better-than-forecast operating profit for its first quarter of 2011, with the positive trend set to continue through the rest of the year.

"We have returned to profitability one year earlier than expected, and we are also implementing the integration of Dresdner Bank in important areas more quickly than planned," Blessing said in a press release.

Silent transfer

SoFFin's silent participation in Commerzbank does not give it typical shareholder voting rights. But it holds a blocking minority stake of 25 percent plus one share, giving it the power to halt capital increases or mergers.

It will retain its blocking minority by "converting additional silent participations into shares," according to Commerzbank.

Author: Gerhard Schneibel (AFP, dpa)
Editor: Sam Edmonds

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