Commerzbank, Germany’s second-largest bank, today said it would accept a €8.2bn (£6.44bn) capital injection from the state and a further €15bn in guaranteed funding.
Commerz, which is taking over Dresdner, its smaller rival, said it had agreed to pay no dividends for the next two years. It will also scrap all boardroom bonuses in 2009 and 2010 and cap its chief executive’s salary at €500,000.
The bank made its moves as it reported a net loss of €285m in the third quarter when it was heavily exposed to both Lehman Brothers, the bankrupt US investment bank, and Iceland, the virtually insolvent country.
It said it made a combined operating loss of almost €900m through these two events. In the first nine months its pre-tax earnings of €2.3bn a year ago shrank to €419m.
Germany’s private sector banks have been under considerable pressure from chancellor Angela Merkel to join her government’s €500bn stabilisation package, with the biggest, Deutsche, creating a storm by saying it would be “ashamed” to take part.
Martin Blessing, Commerz chief executive, said today: “We have decided to make use of the package because this is good for the bank, its employees and its clients. As a result, Commerzbank further enhances its competitiveness.”
Its decision raises its Tier 1 capital ratio closer to 9%, still well below the benchmark level of 13.7% set by Swiss bank Credit Suisse – or the 11.2% reported separately today by Société Générale, the French bank.
SocGen, stung earlier this year by a €4.9bn loss because of alleged rogue trader Jerome Kerviel, is taking a €1.7bn injection from the French state in return for agreeing to increase its lending by 4%
a year.
It said its net earnings declined 84% to €183m in the quarter, with operating income down 59% from €1.78bn to just €724m, as the global banking crisis peaked in September.
David Gow
Monday November 03 2008 08.49 GMT
Source: The Guardian
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