LEAD: Embattled German bank Commerzbank refuses state aid

Jan 19, 2012, 15:04 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 14 per cent to 1.60 euros in Frankfurt on the announcement. The institution is one of the European banks that have suffered huge losses from the eurozone's sovereign debt crisis.

There have been fears some banks could be pushed over the brink by more bad news, such as a default by Greece.

Commerzbank said it was on track to raise 6.3 billion euros (8.1 billion dollars), more than enough 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 this June's requirement for Core Tier 1 capital.

In Berlin, the German Finance Ministry welcomed the announcement and said regulators would check out Commerzbank's proposals.

At a news conference, chief executive Martin Blessing conceded the bank faced a 'challenging environment' but said he expected a 'good result' this year provided there were no more writedowns on the bank's Greek bonds.

Last year's provisional earnings were 1.6 billion euros.

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. 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.

Blessing declined to say what would happen to Eurohypo, the lending unit that caused most of the group's problems. The European Commission has told Commerzbank to divest the unit by 2014 as a condition for regulatory approval of the 2008 state aid.

'You'll get an official announcement when we've got something to announce,' said Blessing.

Analysts have said Eurohypo may be dismembered, with its healthy loans being taken over by the Commerzbank and the rest wound up.

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.