May 27, 2024

DealBook: Commerzbank to Repay $20.3 Billion of German Bailout

1:28 p.m. | Updated

FRANKFURT — The German government will soon get back a big portion of the money it used to rescue the country’s banks two years ago, after Commerzbank said Wednesday that it would repay most of its multibillion-euro bailout by June.

But the move by Commerzbank, a commercial lender based in Frankfurt, also opens a wider gap between German banks that are putting the financial crisis behind them and those that remain on government life support.

‘‘We will see increased differentiation in the German banking system in the next weeks and months,’’ said Nicolas Véron, an economist at Bruegel, a research organization in Brussels. Mr. Véron has often criticized German political leaders for being too slow to confront problems left over from the financial crisis and force banks to become self-supporting businesses.

Commerzbank said it would sell new shares to help repay 14.3 billion euros, or $20.3 billion, of the 16.2 billion euros in capital that it received from the German government in 2009, during the height of the financial crisis. That sum amounts to almost half the 29 billion euros that Berlin pumped into banks in the form of direct capital.

‘‘We are keeping our promise of repaying the temporary assistance from the German government as quickly as possible,’’ Commerzbank’s chief executive, Martin Blessing, said in a statement. German taxpayers will not suffer any loss, he said.

Banks across Europe have been turning to markets in recent months to rebuild their finances and comply with new banking regulations, which require them to hold more money in reserve as insurance against economic shocks. While the new rules do not take full effect until the end of 2018, banks already face investor pressure to show they have ample reserves.

The Italian bank Intesa Sanpaolo said Wednesday that it would issue 5 billion euros in new shares by the end of the year to bolster its capital. The bank, based in Turin, said that it already complied with new regulations, but that it wanted to exceed the minimum capital requirements ‘‘to adequately face the competitive marketplace and future economic uncertainties’’ and ‘‘not to limit the growth prospects and the profitability of the group.’’

Commerzbank’s move comes as the European Banking Authority prepares to examine the health of banks across the European Union. The so-called stress tests are also putting pressure on banks to bolster their reserves.

Mr. Blessing said that Commerzbank’s decision to raise more capital was not motivated by the stress tests, and he expressed confidence that the bank would pass. But other banks are clearly worried.

Some publicly owned landesbanks in Germany could fail the tests because so much of their capital, known as silent participations, is effectively borrowed from state governments. (Commerzbank’s bailout money was also booked as a silent participation.)

The European Banking Authority is expected to announce by the end of the week how it will define capital reserves, a decision that will be closely watched in Germany.

Dieter Posch, the economics minister in Hessen, a German state, said Wednesday that it appeared that the authority would indeed exclude the silent participations. If so, Mr. Posch said, the landesbank in Hessen, known as Helaba, would fail and should consider boycotting the tests.

‘‘Fears that the coming stress tests will damage the economically healthy landesbank Helaba seem to have been confirmed,’’ Mr. Posch said in a statement. ‘‘The silent participations in the landesbank will no longer count as core capital and the bank will not pass the test.’’

Helaba, based in Frankfurt, is owned by local savings banks as well as the states of Hessen and Thüringen.

The weakness of some German banks stands in contrast to the country’s powerful industrial sector. The strength of German manufacturers was underlined Wednesday when the Federal Statistical Office said that industrial orders rose 2.4 percent in February from January.

‘‘The outlook is bright for German industry,’’ Ulrike Rondorf, an analyst at Commerzbank, wrote in a note. ‘‘It remains the strongest pillar of the upturn.’’

Concern about German banks has also complicated attempts by political leaders to solve Europe’s sovereign debt crisis. Many banks in Germany hold Greek, Portuguese or Irish bonds, and policy makers worry that a default by any of those countries could cause another banking crisis. The stress tests in June are expected to provide a clearer picture of how deep the exposure is.

In its statement, Commerzbank said it planned to raise 8.25 billion euros by selling new shares in an offering to be completed no later than June. In addition, the bank began selling notes on Wednesday that will convert to new shares in May.

The German government, however, will continue to hold veto power over Commerzbank’s decision-making. The government, which took a 25 percent stake as part of the bailout, will maintain that ownership share by converting some silent participations to stock. Once converted to ordinary shares, the funds would qualify as so-called core Tier 1 equity, considered the most durable form of capital buffer.

Once all the transactions are complete, Commerzbank’s core Tier 1 equity will be 8.8 percent of assets, the bank said. New regulations to take effect at the end of 2018 require a capital buffer of 7 percent, though banks considered too big to fail — a category that could include Commerzbank — might be required to hold additional reserves to protect them against market shocks.

The German federal government has so far gotten back only a fraction of the money that it injected into four sick banks.

‘‘The end of the story is when we know the government can draw a line under its intervention in the banking system,’’ Mr. Véron of Bruegel said. ‘‘We are a long way from that.’’

Aareal Bank, a lender based in Wiesbaden, last year repaid 150 million euros the 525 million-euro bailout that it had received.

There is currently little prospect that the other two banks that received federal capital will repay it soon. WestLB, a landesbank in Düsseldorf, has been struggling to restructure and find a buyer. Hypo Real Estate, a property lender fully owned by the government now after a bailout, has no timetable for repaying the aid it received, said Walter Allwicher, a bank spokesman.

Berlin also issued guarantees on behalf of nine banks which, at their peak, reached 174 billion euros. The amount of guarantees stood at 64 billion euros at the end of 2010.

Mr. Blessing expressed gratitude to the German government for supporting Commerzbank in the financial crisis that followed the collapse of the American investment bank Lehman Brothers in September 2008.

‘‘The government reacted courageously and quickly following the Lehman collapse,’’ he said.

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