Commerzbank says it will reach EBA capital ratios without help
Commerzbank today said it could reach European Banking Authority capital requirements by mid-year without further state aid, and it had already fulfilled over half the requirement by the end of last year.
The good news for the bank was in contrast to recent bad news such as the downgrades a year ago by Moody’s of Commerzbank and various subsidiaries due to the units’ financial strength.
Commerzbank has consistently been identified as among a list of Germany’s weakest large banks.
In December Credit Suisse noted the German bank suffered one of the biggest increases of German banks – from €2.9bn to €5.3bn – compared to October estimates of shortfalls to satisfy the EBA’s required target of a Tier One capital ratio of 9% by mid-year.
Commerzbank was responsible for a large amount of the total €7.9bn increase in shortfall by all German banks.
But today the German bank said it could strengthen its Core Tier 1 capital by about €6.3bn by mid-year, “relying on its own strength. Thus the bank can fulfil the capital requirement of some €5.3bn as determined by the EBA.”
Indeed Commerzbank suggested it would go further, and reach a Core Tier 1 capital ratio of 11%.
It had already moved to do this via reducing risk-weighted asset – giving Core Tier 1 relief of about €1.6bn); reducing regulatory capital deductions (€200m); and retaining more of fourth quarter earnings (about €1.2bn).
If the macro economic environment does not get worse, Commerzbank said, it would achieve “further positive effects” amounting to up to €3.3bn.
It added other options existed to strengthen the ratio, including a “further optimisation of the capital structure” or issuing equity