Embattled German bank Commerzbank refuses state aid

Jan 19, 2012, 11:21 GMT

Frankfurt - Commerzbank, Germany's second-biggest commercial bank, insisted Thursday it could fix a yawning equity gap without help from the German government.

Commerzbank stock rose 7 per cent on the announcement. The institution is one of the European banks that have suffered huge losses from the eurozone's sovereign debt crisis and could be pushed over the brink by more bad news, such as a state default.

Commerzbank said it will raise 6.3 billion euros (8.1 billion dollars) to satisfy a minimum equity ratio ordained by the European Banking Authority (EBA).

An EBA review last year found Commerzbank was still 5.3 billion euros shy of the requirement for Core Tier 1 capital.

The bank said in Frankfurt it had a 'set of measures' in place to raise the necessary equity. The German government acquired 25 per cent of the bank to save it from bankruptcy in 2008. Chief executive Martin Blessing has repeatedly said he does not want more state aid.

Many investors had feared another state equity injection, which would have sharply reduced the value of their shares.

The announcement said the bank had raised 3 billion euros towards the minimum equity goal by the end of last month and would raise a further 3.3 billion euros in the first half of the year.

It would do this by selling high risk assets and by cutting dividends, retaining profits from the first and second quarter.